Does Chinese New Year really have an impact on Bitcoin Prices?

Does Chinese New Year really have an impact on Bitcoin Prices?

Chinese New Year is also known as Lunar New Year, or the Spring Festival. It’s the event that sees Chinese people from around the world travel abroad and hold big family reunions and give substantial gifts to those close to them.

As it is based on the lunar calendar (rather than the Gregorian one used by the West), the date of Chinese New Year varies every year — usually falling between 21 January and 20 February.

While the public holiday is officially only seven days long, Chinese New Year usually lasts 16 days, from New Year’s Eve to the 15th day of the New Year — ending in Lantern Festival. Most Chinese take the majority (if not all) of their annual holiday over this time, meaning people can be off work from two weeks before the start of the event, and return weeks after it has ended. This means the country, and practically most of its industries can shut down for three, possibly even four weeks altogether.

The holiday also spreads far outside mainland China, and its effects are notable in other countries with large Chinese populations, including Indonesia, Singapore, Malaysia, South Korea, and the Philippines. Most recently, even the New York City board of education has begun recognizing the holiday by shutting down schools on Lunar New Year day.

As a result of such a large holiday, Chinese New Year sparks the most gargantuan mass migration of people each year, as the vast majority of the country’s 1.4 bn people return home to reunite with their families. That is just under a fifth of the world’s population traveling inside and outside China, in a phenomenon calledchunyun a 40-day period beginning 15 days before the start of the lunar year and ending 25 days after, running between 1 February and 12 March this year.

In 2019, 3 billion trips are expected to be made between January 21 and March 1. up 0.6 per cent from 2018. Of those, 2.46 billion trips will be made by automobile, 413 million by rail — a rise of 8.3% — and 73 million by air. There really isn’t any other event that comes close to rivaling this figure. Americans complete about 51 million trips over the Thanksgiving holiday each year, while the annual Hajj pilgrimage to Mecca attracts about 2 million Muslims each year.

With people taking time off, companies and stock markets closed during the New Year, the Chinese and Hong Kong stock markets have historically taken a hit as investors anticipate such slowdown and cut their risk exposure and turn their holdings into cash or safer alternatives. Despite reports that the Chinese yuan now accounts for less than 1 percent of global Bitcoin transactions, I still believe that Bitcoin trading among the Chinese locals and on mainland still makes up a significant amount of total volume (>30%). These traders will also cut their risks and turn their holdings into cash and safer alternatives as much as they can.

Furthermore, during the Chinese New Year, cash becomes king. Gift-giving primarily in the form of ‘red packets’ is a driver of selloffs among retailers. You can also give digital “red packets” on Wechat (per image below), which has become very common among people, but that is ultimately cash.

Similar to how Chinese New Year is affecting its stock market, we have seen a similar phenomenon with Bitcoin in the last few years (read some of the links below). While many have discussed the impact of Chinew New Year on Bitcoin, we still recognize these short-term price changes are rooted in human behavior and traditions, and should not really affect the long term prices.

Bitcoin and The Chinese new year

Put bluntly, you can expect that 2–4 weeks before the Chinese new year there will be 2–3 noticeable sell-off events. Those can be very extreme (as it happened in 2015) or more subdued, resembling an “Adam and Eve pattern” (in technical analysis speak), as it happened in 2018 before the bear market of Jan 28th.

Bitcoin May Stay around $3600 on the Upcoming Lunar New Year’s Day

Actually, bitcoin’s price movement has followed the same pattern for the past three years, experiencing a slump before the Lunar New Year that were followed by an upward trajectory.
[…] Chinese usually cash out cryptos nearly 20 days before Lunar New Year’s Day, making Bitcoin price take a dump. But as the Chinese New Year approaches, bitcoin whales possibly buy more bitcoins at a lower price when many retail investors in China temporarily leave the market, driving up the price.

Bitcoin Historical Events and Price Movement During Spring Festival Holiday-Average Annual Growth About 300% by Research has studied the Bitcoin price change during Spring Festival from 2011 to 2018. Except of the year of 2015 when the price decreased by 71% over the previous year, Bitcoin price on the very day of Chinese New Year saw an increase, average annual change rate of 291.53% .

Price movement in Q1 of each year is largely affected by the market context (market sentiment, local policy, public attention, etc) of the previous year. Before and after Spring Festival, price rises on the very day of Chinese New Year. The price is more likely to rise when compared to price movement a week prior and post to the Spring Festival.

To study the impact Spring Festival event has on Bitcoin price, the Chinese-language report collected the major events in bitcoin history, but also analyzed and drawn chart of bitcoin price movement from 2011–2018. 

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