The final days of a year are usually strong across the markets as lower volatility makes the impact of individual trades greater and as the holiday cheer lifts the spirits of investors.
In 2024, however, the so-called ‘Santa Claus rally’ was truly spoiled by December 30, as both the stock and cryptocurrency markets experienced a substantial downturn.
The crypto market, in particular, proved bloody as the cumulative valuation of digital assets collapsed approximately $200 billion from $3.36 trillion at the start of December 25 to $3.15 billion at press time, per TradingView data.
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Why ‘Santa Claus rally’ was replaced by a ‘Grinch downturn’
The lack of the ‘Santa Claus rally’ – or, perhaps, the presence of the ‘Grinch downturn’ – can largely be attributed to a relatively expected correction and consolidation phase following a massive upsurge as, for example, the cryptocurrency market capitalization skyrocketed $1.4 trillion from $2.29 trillion at the start of November to $3.69 trillion on December 17 – a 61.14% increase.
Furthermore, it fell in line with a broader plunge that came as the most recent Federal Open Market Committee (FOMC) meeting reignited fears of weakening equity markets and the likely higher inflation rate in 2025.
Indeed, while digital assets, spearheaded by Bitcoin (BTC), which fell from about $108,000 in mid-December to $91,687 at press time, took much of the attention, the S&P 500 stock index is down 2.83% since December 17.
Additionally, major stocks like Amazon (NASDAQ: AMZN) and Tesla Motors (NASDAQ: TSLA) are down 5.17% and 13%, respectively.
Will the crypto market continue rallying in 2025?
Still, it is worth pointing out that the latest decline, despite seeing vast amounts of wealth erased from the markets, did little to diminish the overall rise of digital assets – and technology stocks and gold – in 2024.
In fact, while the $200 billion 5-day wipe is staggering and was doubtlessly painful for many investors, the cryptocurrency market is still up $1.47 trillion in 2024, as it started the year with a market capitalization of $1.67 trillion.
Finally, the latest downturn is not necessarily indicative of more trouble ahead as there is, at least at press time on December 30, something of a consensus that the bull market will persist in 2025, with Bitcoin leading the way with stellar price targets that range from lows at $220,000 to highs above $800,000.
Featured image via Shutterstock
