Bitcoin Price Drops because of Chinese New Year?

Chinese New Year (Lunar New Year) has a big influence on cryptocurrency prices, with bitcoin prices declining in the months leading up to the new year. This article examines the trend and possible reasons why it is happening. Chinese New Year is celebrated on a different day each year as it is based on the lunar calendar. below are the days when chinese new year fell in previous years:

  • 2016: February 8 to February 10
  • 2017: January 28 to January 30
  • 2018: February 16 to February 18
  • 2019: February 5 to February 7
  • 2020: January 25 to January 27
  • 2021: February 12 to February 14

This year, Chinese New Year will start on February 1st and end on February 3rd. During this time, many Chinese over-the-counter (OTC) services will be shut down, leading to high volatility of cryptocurrencies.

Reading: Chinese new year bitcoin

*data based on bitcoin prices at coingecko. pre-cny highs taken as average candlestick price up to 7 days before new year.

this period is a public holiday in china, as many employees make the annual trip back to their hometowns to celebrate with their families. with a population of 1.386 million, this represents the largest short-term migration in the world. All factories in China close during this period, with operations frozen for up to 2 weeks as logistics companies and suppliers slowly open up. Chinese New Year is also celebrated in other Asian countries such as Hong Kong, Singapore, and Korea (Korean New Year). With China implementing its national digital currency known as DCEP, further testing and development will take a break during the Chinese New Year. however, it is important to note that during this time, cryptocurrency exchanges will continue to operate and facilitate trading 24 hours a day (see crypto header).

Chinese New Year garbage?

Bitcoin prices were almost always down in the weeks leading up to Chinese New Year.

For example, in 2017, prices dropped 30% from $1,130 to $784 just before the festival. this pattern is known as the “chinese new year discharge”.

In 2019, bitcoin prices fell steadily from $3,491 just before Chinese New Year to lows of $3,397 during the holidays.

2019 Chinese New Year Bitcoin price

2019 Chinese New Year Bitcoin prices

In 2020, prices again dropped before Chinese New Year, even breaking the initial resistance of USD$8.3k. And whilst it did rally up to USD$8.5k on the first day of Chinese New Year, history cannot help but repeat itself, and within the same day plummeted back below USD$8.3k. Prices remained stagnant during the 2nd day of Chinese New Year, and only made a marked recovery and upward trend on the last day of the holidays.

See also: Monero vs Bitcoin | What is The Difference? |

In 2021, the tide seemed to have turned with a gradual rise from $32k to $39k in the first week of February, and a huge 2-day rally to $48k in the few days leading up to the festival. however, following the Chinese New Year downtrend, prices still started to pull back to $46,200, though thankfully not ending the pre-Chinese New Year rally.

2021 Chinese New Year Bitcoin prices

2021 Chinese New Year Bitcoin prices

Decrease in Trading Volume?

data compiled by coindesk research shows that trading volumes on binance, huobi, and okex, the most popular cryptocurrency exchanges catering to Chinese customers, were down during the Chinese New Year period in the last two years. A decline in transaction volume can also be seen during the month of October each year, when Golden Week (a 1-week celebration of the national day) takes place in China.

When a large number of highly leveraged traders bet on bitcoin prices to move in one direction, it creates an opportunity for other large investors (whales) to move prices in the other direction. doing so triggers a cascade of liquidations, sending the bitcoin price into a free fall and creating huge paper losses for leveraged long traders. the whales are then free to “buy the dive” at the expense of the “rekt” traders.

vacation market makers

It is no secret that market makers and trading bots operate in the Cryptocurrency market – in fact, they are responsible for a portion of the market volume. Market makers located in China and other Asian countries will shut down operations for 3-5 days due to the public holidays. Even though market making can be automated by trading bots and algorithms, it still requires humans to watch over the daily operation to make sure the is no malfunction.

During the Chinese New Year, market-making operations will have limited capacity. This leads to more volatile and less liquid markets.

taking back the new year

Giving Red Packets filled with cash is a tradition

One of the possible reasons for the dip in Bitcoin prices is that people are “Cashing out” for the holidays. This is especially true in China because, during the festival, lucky packets packed with cash are traditionally given out to children and the elderly. These “red packets” are meant to symbolise luck and prosperity and the only time where giving cash is not taboo in China.

Tradition dictates that married couples must deliver red packets to unmarried young children, the elderly, and servants. Company executives and managers must also give money to their subordinates, and some packages are filled up to the employee’s monthly salary.

Because of the large amount of cash required, some suspect this tradition is responsible for the surge in bitcoin sell orders ahead of Chinese New Year.

chinese otc volume dips

See also: Rio De Janeiro Integrates Bitcoin In Citys Plan – Bitcoin Magazine – Bitcoin News, Articles and Expert Insights

bitcoin is traded in china over the counter (otc). These OTC desks match orders from buyers and sellers and may offer escrow services. The best desktops include Genesis Block, Binance OTC, and Huobi OTC.

chinese new year 2022 bitcoin dump?

The situation may be a bit different this year because China’s impact on cryptocurrencies has decreased dramatically. although there may still be some volatility as it is still a full national lockdown during this period, the impact may not be as significant as in previous years.

chinese impact is reduced

huobi, asia’s largest stock exchange, will cease retail operations in china. bitcoin has been flowing from asia to the united states and europe for some time. The final impact of the Chinese cryptocurrency ban in September 2021 is unfolding. After phasing out mainland Chinese users, Huobi’s share of global open interest fell to 2%, down from its peak of 20 % on February 15, 2020.

china extraction rate dropped significantly

China used to be the epicenter of bitcoin mining, with a hash rate of over 65%. But then, in May 2021, the CCP began a systematic crackdown on crypto mining activities. the hash rate fell steadily, reaching a yearly low of 58.4 million terahashes/s. this then corresponded with a price drop to $29k, which is a nearly 60% correction compared to April 2021.

The good news is that a lot of mining equipment was shipped to other countries, mainly the United States. In fact, more than $400 million worth of mining equipment has been shipped from China to the United States.

In 2021, Chinese market makers would close their trades during the Chinese New Year, leading to increased volatility and decreased liquidity in the market. but now the narrative has changed. china no longer has as much of an impact on cryptocurrencies and finally the narrative that bitcoin is centralized in china is no longer true. American companies have become beneficiaries of displaced Chinese miners looking for a place to continue their operations. other countries have also seen new miners due to their cheap electricity costs.

more money flows into cryptocurrencies

One of the biggest stories to emerge in 2021 was the adoption of bitcoin as legal tender in El Salvador in September. Its president said the measure would help address the country’s high unbanked population, as well as reduce the costs of remittances in a country of 6.5 million people, where roughly 20% of GDP is made up of international transfers.

Since adoption, the natural question has been which country, if any, could do the same. bukele entered this discussion by making his own predictions on twitter that bitcoin will reach 100k and 2 more countries will adopt bitcoin as legal tender.

predictions for bitcoin 2022 chinese new year?

We are currently in the midst of a mini bear market, prices plummeting from $56.9k to under $47k in a single day in early December 2021, and further to sub-$40k levels in early January 2021. 2022. For now, a recovery back to these early Dec 2021 highs seems unlikely, let alone the above $65k levels we had in Nov 2021 before the dips started. On January 21, 2022, prices fell from $43k to below $39k at one point, spooking investors around the world and causing more panic selling. With Chinese influence waning, there are expected to be fewer similar dips in the weeks leading up to Chinese New Year as we see if prices can recover before the holidays start and dips are expected.

See also: Best crypto wallets in Australia 2022 [50 compared] | Finder

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