Why did Bitcoin rise today? The three major US stock indices hit new highs, igniting the "Christmas rally"

December 25, Bitcoin price slightly rebounded above $87,700. Overnight, the three major US stock indices hit record highs, with the S&P 500 index closing at 6,932.05 points, the Dow Jones at 48,731.16 points, and the Nasdaq at 23,613.31 points. The US third-quarter GDP was finalized at 4.3%, exceeding expectations. Strong economic data combined with the “Christmas rally” anticipation boosted risk assets.

The three catalysts in US stocks ignite crypto market sentiment

The primary reason for Bitcoin’s rise today stems from the strong performance of the US stock market. The S&P 500 index hit consecutive record highs for two days. Despite light trading activity before Christmas, the market showed a “steady upward push.” In individual stocks, Nike surged 4.6%, after Apple CEO Cook disclosed stock purchases that boosted market attention. Micron Technology and Citigroup rose 3.8% and 1.8%, respectively. The rally in tech stocks and financials injected confidence into the crypto market.

The core data driving the US stock market to new highs came from the Commerce Department’s GDP final figures. US Q3 GDP grew at an annualized rate of 4.3%, significantly higher than the Dow Jones forecast of 3.2%. This better-than-expected performance was initially delayed due to government shutdowns, and after release, it temporarily caused traders to lower expectations for rate cuts early next year. However, according to CME FedWatch tools, the futures market still reflects expectations of two rate cuts before the end of 2026. This “strong economy but still accommodative policy” scenario provides an optimal environment for risk assets.

The seasonal factor of the “Christmas rally” should not be overlooked. This phenomenon typically occurs during the last five trading days of the year and the first two trading days of the new year. This year’s window extends from December 24 to January 5. Louis Navellier, Chairman of Navellier & Associates, believes current market conditions are paving the way for the “Christmas rally.” Small-cap stocks have recently shown strong momentum, with the Russell 2000 leading the gains, indicating investors are more willing to take risks as the new year approaches. Mark Hackett, Chief Market Strategist at Nationwide, pointed out that since 1950, the last two weeks of the year are the best performing period in the calendar, with an 80% probability of market gains and an average increase of about 1.6%.

Capital flows and market structure reveal defensive rotation logic

Despite optimistic sentiment in US stocks, the question of why Bitcoin rose today still needs to be answered by examining the crypto market’s own structure. On December 23, crypto ETFs recorded net outflows of $284.1 million. While this data appears unfavorable, it actually reflects portfolio rebalancing by large investors rather than a complete exit from the market. Notably, these outflows did not trigger disorderly sell-offs, indicating that institutional long-term allocation logic remains unchanged.

Three key indicators of market structure

Market share divergence: Bitcoin’s market share rose to 59.1%, Ethereum’s share approached 12%, and the seasonal index for altcoins is only 18/100. Funds continue to shift from high-risk assets to the relatively defensive BTC.

Leverage levels: The total open interest in crypto derivatives hovers around $760 billion, with perpetual futures dominating. The combination of high leverage and weak spot selling suggests increased volatility ahead.

Volatility divergence: Bitcoin’s implied volatility is 44.6, significantly lower than Ethereum’s 68.7. BTC is viewed as a defensive asset in crypto rather than a high-beta trading target.

The rise in Bitcoin’s market share to 59.1% is a key clue to understanding today’s increase. This share typically rises when uncertainty increases, as investors tend to move funds from riskier altcoins to more stable Bitcoin. When US stocks hit new highs and crypto ETF outflows occur, this defensive rotation becomes more evident, making Bitcoin a “safe haven” in the crypto market.

High leverage ratios are a double-edged sword. The $760 billion open interest indicates high market participation, but in a high-leverage environment, narrowing price ranges will eventually force liquidations, potentially causing sharp short-term volatility. The market is currently in the late stage of this compression, where any directional breakout could trigger chain reactions.

Additionally, global liquidity recently hit new highs, surging by $22.2 trillion, supported by India injecting $32 billion, Japan launching a $118 billion stimulus plan, China introducing RMB 1 trillion in credit tools, and the Fed purchasing government bonds. Supporters point out that historically, such capital inflows tend to push up risk assets like Bitcoin. While bullish forecasts suggest Bitcoin prices will continue rising if liquidity remains stable, skeptics warn that funds may flow into bonds or gold first, with a lag effect. Traders are advised to closely monitor the next 4-6 weeks.

Technical compression nearing breakout

(Source: Trading View)

From a technical analysis perspective, Bitcoin’s rise today is supported by chart structure. On the 2-hour chart, BTC is trading near $87,200, within a clear descending channel that has guided price movement since the high near $94,600 in early December. The current price hovers around the channel’s midline, a common pivot area before directional confirmation.

The 50-day moving average remains below the 100-day moving average, confirming short-term bearish pressure. However, both moving averages are flattening, indicating weakening downward momentum rather than acceleration. Recent trading days show small bodies with frequent wicks and multiple doji candles, reflecting market contraction and hesitation. As the RSI approaches 43 and forms higher lows, momentum is quietly strengthening, creating a bullish divergence.

Structurally, the channel appears to be forming a descending wedge, which is typically a bullish pattern. Breaking above $88,800 could open upward targets at $90,600 and $92,700, while falling below $86,500 might lead to declines toward $83,800 and $81,600. Buyers continue to defend the support zone around $86,500–$86,700. Multiple tests without breaking this support usually indicate increasing validity.

In summary, the reasons for Bitcoin’s rise today are a confluence of multiple factors: the spillover from record highs in US stocks, macro support from better-than-expected GDP data, seasonal catalysts from the Christmas rally, structural support from defensive capital rotation, and the technical breakout from descending wedge compression.