Who actually runs the Santa rally?

Key conclusions

Traditionally associated with the last five trading days of December and the first two January, the Santa Claus Rally is now affecting Bitcoin and major altcoins as seasonal optimism, low liquidity and renewed risk appetite shape year-end trading.
As institutional desks remain tranquil during the last week of December, even miniature retail trades can cause price movements. Social media narratives, year-end bonuses, and FOMO often amplify this effect.
Retail traders chase narratives, speedy trends and speculative opportunities, while whales focus on risk management, balance sheet adjustments and capital optimization ahead of the fresh year.
The slowdown in institutional activity increases price sensitivity, making retail-led price increases in Bitcoin, tech stocks and speculative tokens appear stronger than they actually are.

The Santa Claus Rally, which covers the last trading days of December and the first days of January, has aroused the interest of market experts for years. This trend has now spread to cryptocurrencies. A period of year-end optimism, low trading volume and increased risk appetite could result in acute price increases.

What leads to this phenomenon: individual investors or enormous investors? In today’s market, which includes factors such as ETFs, institutional flows and online traders, understanding the dynamics of the Santa Claus Rally becomes even more vital.

The article explains what the Santa Claus Rally is and how holiday periods influence investor behavior among both retail and institutional participants. It examines when each group tends to dominate trade and how to read the indicators shaping growth.

What is the Santa Claus Rally?

Traditionally, the Santa Claus Rally refers to the last five trading days of December and the first two trading days of January, a period that often generated large gains in US stock markets. This is the case with the Standard & Indigent’s 500 (S&P 500). sent has been increasing during this period in most years since the 1950s.

This pattern is no longer constrained to stocks. Major cryptocurrencies also tend to perform well in tardy December, helped by renewed investor interest, constrained activity from enormous institutions and fresh funds entering the market at the beginning of the year.

For example, Solana (SOL) was trading at $56 on December 24, 2023, and rose to $105 by January 5, 2024. Gold often benefits from similar seasonal trends in tardy December as investors adjust portfolios and enhance demand for unthreatening assets.

Who are the main participants of the Santa Claus Rally?

The Santa rally is driven by a combination of market forces and investor psychology. Here are the key groups whose actions are contributing to positive momentum.

Retail investors: Retail investors are individuals who trade through brokerage accounts, cryptocurrency apps, and mobile platforms. They typically make smaller trades, react to market stories, and respond quickly to social media trends.
Whales and institutions: Whales include major cryptocurrency holders, spot ETFs, hedge funds, pension funds, companies and market makers. These participants trade enormous amounts, follow established rules and operate based on structured plans. They adjust their portfolios at the end of the year, manage their risk levels and often utilize derivatives to protect or enhance their positions.

The goals of these groups vary significantly:

Retail traders focus on price trends, narratives and fear of missing out (FOMO).
Whales focus on year-end reporting, risk control and competent utilize of capital.

Did you know? Crypto never sleeps. Unlike stock exchanges that close on weekends and holidays, Bitcoin is traded continuously around the world. This 24/7 activity creates unique patterns such as “weekend volatility,” where prices can move more rapidly because institutional trading desks are offline.

How the lack of holiday activity strengthens investors’ low influence

Retail investors are often seen as initiating year-end rallies as the last week of December typically sees less activity from major institutions. Because many professional desks tend to be quieter during the holidays, even miniature retail purchases can result in higher prices than usual.

Why the holidays are good for retail participation

There are several reasons for the increased participation of retail during the holiday season:

Less institutional activity allows for greater retail influence.
Optimism for the fresh year encourages greater risk-taking and fresh deposits on trading platforms.
Narratives such as the “Santa Claus Rally”, “December hike” and “January effect” quickly spread on social media.
Year-end bonuses and savings often lead to retail purchases.

Preferred retail strategies during this period

Retailers often switch to:

High risk technology stocks
Options trading with leverage
Bitcoin (BTC) and major alternative coins
Smaller tokens that tend to respond quickly to market sentiment.

Because retail traders often follow rising prices, these investments can grow quickly. This can give the impression of coordinated action, even if the moves are mainly emotional and short-lived.

Did you know? On platforms like X, Reddit, and Telegram, a single viral post can drive up the price of a token before official news outlets catch up. This speed of narrative-driven trading has fueled the rise of memecoin, social trading and so-called attention markets.

Institutional whales and cryptocurrency surge at the end of the year

While retail may start a rally, the whales often determine its size.

The growth of institutional investment has increased significantly

Since the launch of Bitcoin cash ETFs, institutional investing has become a major force in cryptocurrency markets. Immense Bitcoin ETF purchases could lift the broader market. When pension funds and institutional managers add riskier assets in tardy December or early January, the resulting inflows often trigger broader and longer-lasting gains.

Rebalancing at the end of the year

Whales perform organized steps:

Pension funds and asset managers are adjusting portfolios to target levels.
Hedge funds are changing their risk levels and closing tiny positions before the fresh year.
High-performing institutions may enhance risk as they prepare for January action.

These corrections can generate enormous buy orders that significantly impact markets during periods of low volume.

Derivatives and advanced trading

Whales also influence derivatives markets, including futures, options and perpetual contracts. A single hedge fund adjusting or protecting a position could change funding rates, trigger tiny trades or trigger chain reactions in holiday markets. These moves can sometimes look like retail excitement, even if they are driven by institutional risk management strategies.

When retail leads and when whales dominate

Both groups influence the Santa Claus Rally, but their influence varies depending on market conditions.

Scenario 1: Retailer-led Santa Claus Rally

Retail tends to dominate when:

These situations often result in rapid and volatile price movements. These are most perceptible in memecoin, small-cap stocks, and higher-risk assets.

Scenario 2: Whale-led Santa Claus Rally

Whales tend to lead when:

Investments in ETFs are growing
Hedge funds expect policy changes, such as interest rate cuts
Institutions are making major portfolio adjustments
Derivative financing is improving.

This tends to result in steadier, broader rallies and stronger gains in Bitcoin, Ether (ETH) and enormous alt coins.

Scenario 3: Combined system (currently most common)

In current markets, the typical pattern is combined:

Retail creates history and initial momentum.
Typically, whales provide capital to maintain or expand the rally.

Recognizing this interaction is crucial to forecasting December results.

Did you know? Futures, perpetual swaps and options currently dominate global cryptocurrency trading volume. In particular, perpetual futures contracts have no expiration date, making them a favorite among sophisticated traders. Funding rates from these markets often serve as early indicators of trend strength or potential reversal.

How to read real-time Santa Claus Rally 2025 metrics

As the 2025 Santa Claus Rally develops, there are specific metrics and data points to track to assess its strength and sustainability.

Retail metrics worth watching

Search for cryptocurrency trends and meme stocks
Social media activity and tone
Deposit patterns from miniature accounts on stock exchanges
An enhance in the number of downloads of trading applications
Onchain activity from miniature wallets.

Whale indicators to watch

Net inflows into Bitcoin ETFs
Accumulation on a chain with enormous handles
Options open interest and positioning bias
Financing rates for perpetual contracts
Hedge fund position reports.

Macro signals

December inflation reports
US Federal Reserve Statements
Volatility indexes such as the CBOE Volatility Index (VIX) and the Bitcoin Volatility Index (BVIX)
Global Fund Flows.

Together, these metrics provide a clearer picture of which group is driving the markets.

Risk Control: Don’t let the Santa Claus Raid ruin your investments

Holiday markets are often characterized by low volume, heightened emotions and sudden reversals. These conditions can make price movements unpredictable, so understanding the risks is vital for anyone watching the market.

Common considerations during this period include:

Awareness that lower liquidity may cause excessive price fluctuations
Recognizing that moves motivated by sentiment may not be sustainable
Understanding that leverage, if used, can enhance both profits and losses
Please note that seasonal rallies may end abruptly
Noting when the momentum appears to nippy or stabilize.

The Santa Claus Rally may be an engaging seasonal occurrence, but it is not guaranteed. Relying solely on historical behavior without considering current market conditions can lead to misunderstandings about potential outcomes.