Holiday Spending May Be a Factor in This Week’s Bitcoin (BTC) Crash, Last Year Bitcoin (BTC) Dropped $3,400 Mostly Before Black Friday

November 22, 2019 / by Zachary Mashiach

It seems the Grinch may be stealing crypto Christmas. Bitcoin (BTC), and the rest of the crypto market has been dropping sharply the past few days, from $8,600 to as low as $6,800. On CoinMarketCap, there is red across the board as of the morning of Nov. 22, with many major cryptocurrencies down over 10%. This continues a longer-term downtrend that started just before Halloween when Bitcoin (BTC) was near $9,800. The total crypto market cap has shed over $60 billion during this time and is now hovering just above $190 billion.

Back in 2018 Bitcoin (BTC) saw a similar drop right around the same time, going from $6,500 in the first week of November to the bear market low of $3,100 right before Christmas. Most of the drop in 2018 happened in the week or so leading up to Black Friday, which is the annual holiday when stores offer extreme discounts but only for a limited number of people per item, causing apocalyptic scenes of shopper frenzy like in the video below. 

It is possible that people sell off their Bitcoin (BTC) and other cryptocurrencies before the holidays so that they can afford gifts, travel to visit family, vacations, and lavish outings. Indeed, the holiday season is one of the most important times of the year for corporations and the stock market since it coincides with a significant fraction of total annual retail spending.

Holiday spending numbers are actually shocking. It is estimated that each American adult spends $920 on average for gifts, totaling $1 trillion of spending nationwide. That is just for the United States. Holiday spending is a global phenomenon, and total spending globally is likely much more than $1 trillion.

Combined with low liquidity across the crypto space, which is likely less than $500 million and even that may be an overestimate, even a small fraction of holiday spending coming from cashed out crypto can lead to significant bearishness.

This trend may be enhanced by the upcoming CME Bitcoin Futures Expiration. There is an interesting connection between Black Friday and the November expiration since they occur around the same time, or as is the case this year, on the same day. So it stands to reason that people will be selling off Bitcoin (BTC) so that they can buy gifts on Black Friday, causing market pessimism. When there is market pessimism for any reason, Bitcoin (BTC) usually crashes as the CME expiration approaches.

Unfortunately for the crypto market, Black Friday and the CME Bitcoin Futures Expiration is still a week away, and if last year’s crypto market trends are indicative of what is going to happen this year, the price of Bitcoin (BTC) could drop even further before the end of November. Also, last year Bitcoin (BTC) continued to drop until about a week before Christmas, although a brief rally occurred right after the November CME expiration.

The silver lining is that the drastic drop in crypto prices so far this holiday season has created a buying opportunity for those who can afford to stash more Bitcoin (BTC), and this opportunity may only get better as Black Friday and Christmas approach. Also, once the holiday spending pressure leaves the market, the crypto market may be in for a solid rebound.