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At last, the holidays are upon us; a time for family, feasting, and everything in between. Holidays have an immense impact on consumers, many of whom spend the whole year waiting for the holiday season. This impact, naturally, extends to their financial habits, with billions spent each year on the holidays.
But what about cryptocurrency? After all, crypto is becoming a solidified part of our daily lives, so it must feel some of the impact of the holidays, right? To understand this impact, if any, it is worth exploring consumer and market behaviour around the holidays.
Past Christmas’ Bitcoin Prices
A look at the previous bitcoin price movement around the holidays shows a few patterns.
In 2017, the bitcoin price rose in the middle of the month, but they saw a decline in the days leading up to Christmas and didn’t quite regain its momentum for the rest of the year. It should be noted that this was around the time that bitcoin was seeing its historic bull run that saw its price reach a then-all-time-high of around $20,000.
During the holidays in 2018, the bitcoin price had seen a slump below $4,000 and remained in the red for most of the month, eventually rising slightly around Christmas day before falling below red again.
In December 2019, the bitcoin market was in a noticeable slump, trading below $7,500 for most of the month with a very slight rise in the days leading up to Christmas.
Christmas 2020 saw bitcoin break above a new resistance level in the latter half of the month of December, exceeding $20,000 and maintaining this momentum till the end of the year.
Consumer Behavior Around Christmas and What it Means for Bitcoin
The holidays are an important time for the investor market and are often marked by some specific consumer behaviours. For example, the value of assets linked to goods and services that are high in demand around this time goes up, though this mostly relates to consumer goods rather than cryptocurrency.
However, when it comes to cryptocurrency, one end-of-year consumer behaviour that tends to make a difference is asset gifting. Because of popular holidays like Christmas that involve gift-giving, it is not uncommon for people to gift stocks, shares, and crypto assets to other people.
This perhaps explains the slight volatility in Bitcoin’s value in December 2020 and 2018. However, this isn’t a hard and fast rule as it is often dependent on the overall state of the industry. It could also be argued that during the holiday periods where the crypto market is in a decline, people are less likely to buy an asset like bitcoin that is falling in value.
Then there are year-end asset offsets as the holidays are around the time of the year where most people review their investment performances for the year and decide which assets to stock up on and which to offload. If bitcoin has had a particularly profitable year or if there is a forecast of good performance in the year to come, an increase in demand will probably be seen.
There is also the issue of interest maturation at the end of the year. Many people these days put their bitcoin into interest-bearing accounts at the beginning of the year and receive their interest during the holidays. Once again, If the market is doing well, they might opt to sell off their tokens, increasing the supply within the market.
The new year is also a common time for new crypto market entrants. Thanks to the culture of new year’s resolutions and similar to other industries like the fitness sector, the beginning of the year often sees people finally buying crypto wallets and dipping their toes into the industry, which can create a spike in value.
The holiday season has the same impact on the bitcoin price as it does on other assets. Depending on the specific year, people buy more bitcoin to sell off their stash. This, in turn, has a massive impact on the price of the world’s most famous token, for better or worse.
However, volatility does not always have to be a bad thing, and several professional traders use this opportunity to swing trade and generate profits.Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.