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Bitcoin Santa Claus rally unlikely, according to on-chain and derivatives data

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Bitcoin Santa Claus rally unlikely, according to on-chain and derivatives data

Bitcoin traders

Bitcoin Santa Claus rally unlikely, according to on-chain and derivatives data

For traders looking for a Christmas gift in the form of a ‘Santa Claus rally’ for Bitcoin, chances are it won’t be coming this year. According to on-chain and derivatives data, all indicators point to a relatively weak year-end rally, if any at all.

Weak institutional adoption

Institutional adoption of Bitcoin has been weak this year, with only a handful of major companies adding the asset to their portfolios. This lack of mainstream adoption, combined with lower investor demand, has put a dent in the upside potential of the coin.

Derivatives data

Derivatives data indicate a bearish market in Bitcoin, with the majority of positions in derivatives contracts being short. This suggests that more traders are expecting a drop in price rather than an increase.

Liquidations

In addition, liquidations are increasing as traders are taking on more risk in order to capitalize on any potential price movement. This high degree of leverage implies that there is a lot more downside risk than upside potential.

On-chain data

On-chain data also suggests a bearish trend, with network congestion increasing and transaction fees surging. This indicates that there is less liquidity in the market, making it difficult for traders to execute large orders.

Conclusion

All in all, the outlook for Bitcoin does not appear to be too rosy for the Christmas season. Unless there is a sudden surge in institutional adoption and a pickup in investor demand, it looks like the Santa Claus rally will be a no-show this year.

Amidst the global pandemic and economic uncertainty, there is no traditional rally for Bitcoin this December, according to on-chain and derivatives data.

“Santa Claus” typically refers to a late-December market rally in which investors see a surge in the prices of certain stock and cryptocurrency markets.

With on-chain activity in certain cryptocurrency markets significantly slowed, the older investors are not ready to take a chance on the market and this normally reliable trend is not forecasted to happen this year.

In addition, derivatives data from the likes of Bakkt is also showing a distinct lack of investor appetite in the Bitcoin futures markets. Bakkt is a popular platform that provides a large number of Bitcoin derivatives, including daily, monthly and quarterly futures contracts.

Analysts suggest that the lack of a Santa Claus rally is a sign that confidence in the Bitcoin price is low among traders, who may be opting to lock down their profits and take a wait-and-see approach formerly seen in more traditional financial markets.

Taken together, the combination of on-chain and derivatives data suggest that a late-December Bitcoin Santa Claus rally is unlikely in 2020.

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