On the eve of the Chinese New Year, also known as the Spring Festival, the digital asset market is often flooded with news of impending price drops. The authors of the forecasts explain the likely negative dynamics by the fact that the Chinese crypto community is leaving for the weekend. The editors of BeInCrypto decided to find out whether the Chinese New Year really affects the behavior of the market and what scenario investors should prepare for in 2022
Chinese New Year: a few words about the holiday
Chinese New Year begins at midnight on the second new moon after the winter solstice. Therefore, the Spring Festival in China does not have a fixed date. It is necessarily celebrated either in January or February, depending on the period of the second new moon after the winter solstice. The end of the Chinese New Year falls on the Lantern Festival. It is celebrated on the 15th day of the 1st month of the lunar calendar.
In 2022, the Chinese New Year will begin on February 1st and the Lantern Festival on February 15th. We tell how the Spring Festival can affect the behavior of cryptocurrencies against the backdrop of a change in the position of China in the crypto industry.
The reaction of the crypto market to the Chinese Spring Festival
To understand how the digital asset market reacts to the Chinese New Year, the BeInCrypto editors decided to analyze the behavior of the most capitalized cryptocurrency – bitcoin – during the Chinese holidays over the past five years. For this, we used the daily chart of the coin. Here’s what we found:
- Over the past five years, bitcoin has gone up in the early days of the Chinese New Year.
- In 4 out of 5 cases, by the Lantern Festival, the BTC rate turned out to be higher than the indicators of the day the Chinese New Year celebration began.
- An active sale of bitcoins during the celebration of the Chinese New Year was recorded only in 2017 and 2021. At the same time, in 2017, BTC still completed the period above the first day of the holidays.
The behavior of bitcoin during the celebration of the Chinese New Year. Vertical lines – New Year (all odd) and Lantern Festival (all even). Chart: Trading View
Recall that halvings significantly affect the movement of bitcoin. The process implies a 2-fold reduction in the reward for cryptocurrency mining. Changes slow down the flow of new coins to the market. Halvings happen about once every 4 years. They amplify the BTC deficit. The process, as history shows, has a positive effect on the behavior of the cryptocurrency rate.
How Bitcoin Might React to Chinese New Year 2022
The last bitcoin halving was recorded in May 2020. Prior to this, the decline in the BTC release rate occurred in July 2016. Considering that the reaction of Bitcoin to halvings is similar, in 2022 investors can see the behavior of the coin according to the 2018 scenario (2 years after the 2016 halving).
On the chart, the expected trajectory of BTC movement against the backdrop of Chinese holidays, similar to the 2018 scenario, can be represented as follows:
Possible trajectory of Bitcoin movement against the backdrop of Chinese New Year 2022. Chart: TradingView
It is important to recall that China’s position in the digital asset market has changed significantly. The fact is that the local authorities “squeezed out” most of the members of the crypto community from the country in 2021. As a result, China has lost the title of the capital of mining. America has become the new largest center of bitcoin mining.
At the end of 2021, China accounted for only 20% of bitcoin hashrate, according to CNBC. For comparison, back in September 2019, the figure exceeded 75%.
Comparison of bitcoin hashrate distribution maps by country in August 2021 and September 2019. Source: ccaf.io
The changes indicate that the possible pressure of the Chinese members of the crypto community on bitcoin has decreased. Based on this, it can be assumed that the influence of the national holidays of the PRC on the behavior of the cryptocurrency has also weakened.
Despite the popular belief that prices in the digital asset market are falling during the Chinese New Year celebration due to the fact that many members of the Chinese crypto community leave for the weekend, the results of the analysis suggest otherwise.
In 2022, against the background of the struggle of the Chinese authorities with miners, the influence of local crypto investors on the market has probably weakened. Based on this, it can be assumed that the beginning of the Chinese New Year celebration on February 1 will not exert significant pressure on the crypto industry.
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