Festive Shroud is the first cape implemented in game and came with phase 2 of the Christmas 2020 event. It has no requirements to be equipped.
It was acquired as a drop from Krampus in Santa's Workshop during the Christmas 2020 event. It is also able to be acquired as a rare drop from the completion of the Krampus’ Key during the Christmas 2021 event.
Through means unrelated to events, the only way to acquire this item is through a rare augment transformation from a Decayed Cloak.