The Santa Rally—Wall Street’s beloved year-end tradition—has found an eager audience among Chinese crypto Twitter’s most followed analysts.
Far from dismissing it as Western-market folklore, key opinion leaders in the Chinese-speaking community are treating the final trading days of 2025 as a critical signal of what lies ahead in 2026.
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Santa Rally: More Than Seasonal Noise
Phyrex, one of the most cited macro analysts in Chinese crypto circles, argues that the Santa Rally is not merely a statistical curiosity. He asserts, “It’s more like a barometer of market risk appetite.” According to him, if markets rise as expected from Christmas through New Year—without any new macro catalysts—it reflects investor confidence in risk assets. This sentiment can set the emotional foundation for pricing in the upcoming year.
However, the risk of a failed rally looms large as well. Phyrex cautions that a lackluster performance during this time could suggest that investor appetite remains weak, potentially leading to choppy trading or further declines into January and beyond. Understanding these dynamics is crucial for traders looking to navigate the upcoming market landscape.
Phyrex points to several mechanical factors typically supporting year-end gains. For instance, tax-loss harvesting often concludes by mid-December, allowing capital to flow back into stocks. During the holidays, institutional trading desks quiet down, resulting in thinner volumes, which can allow modest buying to lift indices higher. Added to this are year-end bonuses and automatic contributions to 401(k) plans that provide passive buying support.
Michael Chao, a prominent US-focused markets commentator on Chinese social media, highlights the historical data: since 1950, the S&P 500 has climbed 75% of the time during the Santa Rally period, averaging a gain of 1.55%. This statistic fuels optimism among traders hoping for a repeat performance.
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But Risks Loom Large
Despite the promise of potential gains, not every trader is raising their glass in anticipation. Cryptojiejie has pointed out that Bitcoin and Ethereum trading volumes have dropped to their lowest levels of 2025, labeling current market conditions as “garbage time” for traders. She suggests that traders focused on breakouts might want to step back and enjoy the festive season until liquidity returns.
Macro factors further exacerbate hesitation in the market. Zhou Financial observed that the Bank of Japan’s decision to raise its rate to 0.75% has sparked concerns regarding the unwinding of the yen carry trade. Coupled with the Federal Reserve’s recent hawkish 25-basis-point rate cut and a dot plot indicating only two cuts through 2026, market expectations for more accommodative monetary policy have been disappointed.
Phyrex’s assessment of the situation is stark. He posits, “If the market still can’t form an effective rally under seasonal tailwinds and gradually recovering liquidity, it likely indicates that the pressure from the current high-rate environment has already overwhelmed any sentiment boost from the festive season.” This candid view paints a less-than-rosy picture for those holding out for a traditional rally.
The 2026 Preview
Phyrex considers this Santa Rally more than just an end-of-year occurrence; he perceives it as a significant indicator for the expectations of Q1 2026. The reasoning is simple: if investors aren’t willing to bid up risk assets during a time when seasonal opportunities, sentiment, and liquidity should theoretically align, it could signal deeper issues in the market.
This intense focus on Wall Street and the Santa Rally may also reflect a lack of viable domestic options for Chinese investors. Just recently, seven major Chinese financial industry associations collectively issued a risk warning, marking the most extensive crypto crackdown since the 2021 ban. The warning explicitly prohibits various activities, including the tokenization of real-world assets, stablecoins, airdrops, and even mining.
With regulators cutting off virtually all avenues for crypto investments, Chinese investors find themselves sidelined, looking to global markets for clues and opportunities. As Chinese crypto Twitter closely watches Wall Street, the anticipation builds—will the Santa Rally deliver, or will it be a year-end disappointment?
