Santa Claus Rally: Should You Buy High-Tech Stocks or Cryptocurrencies? (opinion article)

Despite the Federal Reserve’s recent interest rate cut by another quarter percentage on Wednesday, the price of Bitcoin plummeted.

The asset fell as much as 15% at one point. Meanwhile, this vital sign so important to the health of the Web3 blockchain economy is still down 3.5% over the 30 days ending December 24.

But it wasn’t just the Bitcoin and cryptocurrency markets that plummeted. NASDAQ Composite technology stocks also fell 3% in the last five trading days on Wall Street. So will there be a Santa Claus rally this year to save Christmas and Hanukkah from the Grinch?

How Hi-Tech Nasdaq Stocks Fare in Santa Claus Rallies

Chances are, the decline in stocks and cryptocurrencies over the past week has been in part a simple matter of markets stopping to catch their breath. Both soared to record levels in the first half of the month.

Dominic Pappalardo, chief multi-asset strategist at Morningstar Investment Management, says these lofty valuations leave little room for error. he said“Today’s extreme market reaction is being driven by the extremely rich valuations of today’s risk assets.”

Meanwhile, the Federal Reserve’s revised outlook, which expects fewer cuts in the future after the most recent one in December, may have dampened market enthusiasm. “The move in stock markets can be attributed to the Federal Reserve’s updated outlook for fewer cuts in 2025,” Pappalardo said.

There will probably be a Santa Claus rally this year.

Historical data since 1950 sample that US stocks have received this seasonal boost in 79% of the years. Historically, the average stock gain during this rally is around 1.3%.

However, keep in mind that the NASDAQ’s profits and losses are typically larger than those of the broader U.S. stock market. Additionally, stock gains and losses since the pandemic have also shown a higher standard deviation than in most historical periods.

How Cryptocurrencies Like Bitcoin Are Faring in the Holiday Pumps

For cryptocurrency savers, investors, and day traders comparing high-tech stocks to Bitcoin and altcoins, it’s worth noting that historically, cryptocurrencies also take a hit from Santa Claus during the holidays.

Additionally, the Santa Claus push for cryptocurrencies was often steeper than stock gains during this period. However, keep in mind that altcoin losses can also exceed those of stocks as Krampus brings coal to the financial markets.

Last year’s Santa Claus rally saw a 4.87% rise in the price of Bitcoin, while the NASDAQ Composite increased by only 0.46%.

In the previous year, the price of Bitcoin fell -0.61, while the NASDAQ recorded a gain of 0.04%. However, during the 2021 holidays, instead of a Santa rally, there was a Krampus drop.

Bitcoin lost a noticeably larger percentage than the NASDAQ. While tech stocks in this benchmark fell -0.59%, Bitcoin capitulated -6.8%.

Conclusion for investors at the end of the year in 2024

Both tech stocks and cryptocurrencies like Bitcoin are enjoying a very strong rally that many analysts believe looks poised to gain much more long-term ground for these assets.

During the last five days of December and the first two days of January, there is usually a rise in stocks and cryptocurrencies. Whatever direction the markets take, Bitcoin usually goes further.