If you spent any time in the crypto-verse this month, you have likely heard of the upcoming Christmas Pump (or Pamp if you will). Followed by the New Years Dump (Damp?).
It seems to be a foregone conclusion on crypto-twitter that every year we get a nice rally going into year end and a Q1 dump.
Now, if you are like me, you enjoy counting your crypto millions before they hatch. I pulled up the historical charts so I could plan ahead how much richer I will be after perfectly timing my trades this month.
Let’s dig into the historical Santa Claus rallies.
What the Historical BTC & ETH Price Data Shows
The first time I really took a look at crypto was around 2018. I purchased some, the price went down, I sold because it was clearly a scam. Therefore, I use 2018 as the starting point to where retail likely heard and looked at crypto. The market will behavior very different before and after retail has exposure, so pre-2018 I view as a different investor base.
So what does the data show?
The price action on Bitcoin and Ethereum is certainly choppy and volatile. On the zoomed out chart it seems like there may be some validity to the claim.
The other thing that stands out, is whoever was telling you to buy Ethereum in April 2021 was giving some great advice. (Oh, you can’t read it because the link is behind a paywall that is $10 a month to subscribe to. Literally has paid for its self 100x over. Stop being that weird frugal guy).
We have 2018, 2019, and 2020 year-end data to look at closer to see these Santa Claus Rallies in action.
Ethereum & Bitcoin End-of-Year Moves
If we zoom into Q4 & Q1 of each year, we can get a better look at the historical Christmas rallies:
December’s returns have been +16%, -15%, and +21% for Ethereum and -8%, -5%, and +48% for Bitcoin over 2018/2019/2020 respectively. Good results, but fairly inconclusive from a foregone conclusion of a pump.
December 2020 was by far the strongest month of the three (+21% for ETH and +48% for BTC), but it was the beginning of a larger bull run. Therefore, there was no New Year’s dump as January 2021 saw +78% and +14% returns for ETH & BTC respectively.
Is there Going to be a Christmas Pump in 2021?
Did you splurge on Rolexes expecting to be crypto rich by the end of the year and asking if you should return it?
Yes, you should return it.
But that has nothing to do with whether there will be a Christmas Pump. Anyone on crypto-twitter claiming the market always pumps for Christmas is selling confirmation bias. Honestly, if I wasn’t writing this post, I wouldn’t have looked at the historical charts to see. Christmas pump sounds reasonable and makes me feel good.
However, we are down around a dozen points on ETH & BTC this December as of this writing and well off all time highs. Additionally there is always self-fulfilling bias, if everyone is expecting a pump and buys with the expectation of dumping in the New Year, the rumor becomes real.
What Is My Plan?
Same as always, continue to make periodic buys and try to block out the noise.
Decembers historically don’t look much different from any other month. Do we have a Christmas Pamp this year? Maybe. But look at that historical chart, there is a lot of volatility and opportunity to add at lower levels.
It is easy to get in an echo chamber on twitter, feel the FOMO, and buy the top. Remember, we are still early.
