Bitcoin correction weakest of 2021 so far, as hopes of Santa Claus rally rise

There has been a meaningful decline before a rebound at the end of prior bull market cycles, and if history repeats itself, it may happen again.

Bitcoin set an all-time high of about $69K on Nov. 10 and has since dropped around 17% to current levels.

However, November’s drop was the smallest correction of 2021, dwarfed by Bitcoin’s massive 53.4 percent drop in three months between April and July. The most recent drop, which occurred in September, was the second-largest, hitting 37 percent from the ATH in April.

Glassnode, in its Nov. 29 “Week Onchain” report, said that the current downturn is “business as usual for Bitcoin holders,” implying that it will soon be gone. This current market drop is “really the least severe in 2021,” according to the report.

Some feel we’re on pace for a Santa Claus rally, barring a stock market crash as the Omicron variant scenario worsens. It’s a stock market phrase for when prices climb over the last five trading days of December and the first two trading days of January, but it’s also been observed in crypto markets in prior years and is commonly used as a shorthand for price increases throughout December.

Last December, BTC values increased by 47 percent over the month, while December 2017 saw an 80 percent increase to a new all-time high. Both were in bull markets, just as we are now.

BTC was selling at slightly over $57K at the time of writing, suggesting that a Santa Claus rally similar to last year may see prices rise to $80K by the end of the year.

Nikita Rudenia, the co-founder of 8848 Invest, is similarly optimistic about a Santa Claus rally, saying:

“Despite the evident failures thus far, Bitcoin is still on course to end the year at $70,000 per coin, and if that goal is met, the currency might reach $75,000 in early 2022 before a significant downturn.”

Ether, surprisingly, is now outperforming. According to the research, the ETH/BTC ratio is at its highest level since mid-May, at 0.082 BTC per ETH, or roughly 12 ETH per BTC. This might lead to more price rises in December for ETH.

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Following a thorough examination of on-chain trends, Glassnode came to the conclusion that Bitcoin investors are in a better position than they were during the September drop.

“Both long and short-term holders have more profitable supply than during September’s slump, which may be considered as generally positive for price.”
Since September, according to Glassnode, the overall share of lucrative supply owned by short-term investors has climbed by 60%. “This combination generally puts forth a pretty bullish short-term picture in bull market conditions,” it concluded.

As a result, expectations for a Santa Clause rally are beginning to rise. The end-of-year surge can be attributed to a variety of factors, including holiday cheer and increased liquidity as a result of Christmas bonuses.

However, if there is a significant impact on global financial markets and further lockdowns are imposed or appear inevitable, the new Omicron model might put a damper on the party. Investors may stay on the sidelines for the time being, according to Nasdaq, until more information on the new virus strain becomes available.

Glassnode concluded that Bitcoin investors are in a stronger position than they were during the September decline after a thorough review of on-chain movements.

“Both long and short-term investors have more lucrative supply than they did during the September collapse, which is typically beneficial for price.”
According to Glassnode, the overall proportion of profitable supply controlled by short-term investors has increased by 60% since September. “In bull market conditions, this combination typically paints a rather positive short-term picture,” it concluded.