As the year approaches its end, the stage is set for a potential “Santa Claus squeeze” in the digital asset market, according to Markus Thielen, the Head of Crypto Research and Strategy at investment firm Matrixport.
In his Deribit Insights report, Thielen highlights that bitcoin typically experiences an average 23% rally during the pre-Christmas months of November and December. Recent data also indicates that higher beta crypto assets outperformed bitcoin for the first time in a while, suggesting the possibility of a Christmas rally.
Thielen identifies three key macroeconomic events from the past week that signal a peak in interest rates for the current economic cycle, which could boost risk assets. The US Treasury’s move to issue shorter-dated debt implies an expectation of falling interest rates, benefiting tech stocks and cryptocurrencies. Additionally, dovish signals from Federal Reserve Chair Jerome Powell suggest a potential pause or even rate cuts in 2024, instilling optimism in risk asset markets. Lastly, a disappointing US nonfarm payrolls report points to a cooling labor market, reducing the likelihood of further rate hikes.
Thielen also draws a parallel with bitcoin’s price surge of around 400% when the Fed concluded its last interest rate hiking cycle in January 2019, hinting at the possibility of significant advances in the cryptocurrency market for 2023 and 2024.
