Will the coming of the Spring Festival turn into a spring robbery?
The most anticipated Spring Festival is coming soon. Compared with the "Spring Tribulation" in previous years, some analysts and traders predict that there will be no such event this year."Chinese New Year Effect", that is, the price of Bitcoin (BTC) will not fall around the Spring Festival this year. Why did the "must fall every festival" fail? They believe that the influence of Chinese retail investors on the cryptocurrency market has greatly diminished.
Some believe there will be no "Chinese New Year smash" this year, as the main drivers of the current bull market are institutional investors based in the U.S. and Europe, in stark contrast to the 2017 bull market, which was largely Driven by Asian retail investors.
secondary title
cash is king
Cobo Vice President Alex Zuo pointed out that domestic traders tend to withdraw their crypto assets and cash out, just like Americans do.
Felix Wang, who is in charge of China business at Hedgeye Risk, explained that due to the tradition of giving red envelopes in China, traders need cash, so they will liquidate some of their financial assets before the Spring Festival, which may cause some financial markets to experience a little pressure.
Also, liquidity is a factor. Most companies will have a holiday of about a week during the Spring Festival, and cryptocurrency companies in China are no exception.
According to data from Coindesk, during the Spring Festival in the past two years, the trading volume of crypto exchanges favored by domestic users such as Binance, Huobi, and OKEx has declined, and the trading volume has also declined during the National Day period.
Reduced liquidity and increased withdrawals expose the market to higher risk of price volatility. TradingView’s trading data for Binance’s Bitcoin/USDT (series) trading pair shows that in each of the past three years, the price of Bitcoin has fallen before the Chinese New Year.
Looking at price action in the 14 days leading up to Lunar New Year over the past three years, according to CoinDesk's BPI data, bitcoin's price fell as people began taking the holiday to prepare for the holiday.
In 2018, bitcoin's price fell to $5,947.40, down 37.2 percent from its peak of $9,471.46 over a 14-day period.
In 2019, during the same period, the price of Bitcoin fell to $3,346.14, down 8.3% from the previous high of $3,648.50.
secondary title
Why 2021 might be different
Ox, this kind of animal is endowed with the intention of rising in the investment market, and the Year of the Ox also increases Chinese people's confidence in investment to some extent. While some may have sold their Bitcoin, a large number of Chinese traders and investors, betting on a long-term bull trend, are firmly holding BTC into the new year.
Matrixport's Cynthia Wu said that aside from the approach of the holidays, she has not noticed a lot of bitcoin selling from other miners. Paying year-end bonuses to employees before the Spring Festival is just a simple Chinese New Year custom.
According to the observation of Robbie Liu, the market analyst of OKEx, OK’s recent USDT/RMB exchange rate has not appeared"abnormal fluctuation", There has not been any liquidity problem this year.
secondary title
Additional Impact: Crackdown on OTC
The crackdown on over-the-counter (OTC) services is another potential reason for the drop in cashouts years ago, people familiar with the matter said. As previously reported, as the domestic crackdown on the use of cryptocurrencies for money laundering has intensified, over-the-counter transactions have become more difficult, and waves of frozen cards have caused the frequency of withdrawals to plummet.
According to the anti-money laundering report released by PeckShield on February 5, the outflow of unregulated digital currencies in 2020 totaled $17.5 billion, an increase of 51% over 2019. Some crypto users of major crypto exchanges may find their bank accounts frozen because their OTC trades may have been accidentally involved in money laundering without realizing it. These accounts may have been "tainted" and temporarily frozen while the authorities pursued the case.
The People's Bank of China and the State Administration of Foreign Exchange recently issued a new notice to further guide banks on how to operate cross-border business and strengthen the crackdown on money laundering and terrorist financing.
"It's so easy to sell your cryptocurrency through an off-exchange counter and exchange it for RMB instantly."According to one source,"secondary title"
COVID-19 remains an uncertain event
Although the coronavirus pandemic in China has been well contained compared to most Western countries, the number of new cases in the past month has led the Chinese government to impose more restrictions on travel around Chinese holidays. Uncertainty surrounding coronavirus restrictions during the holidays could have an impact on crypto markets, some said.
Hedgeye's Wang sees new and strong interest from retail investors in China's financial markets since December, driven by investor enthusiasm for Chinese investment and a "boom" of IPOs by Chinese companies.
According to the report data of China Securities Clearing Corporation in December, there were more than 1.6 million newly registered individual stock investors in China in December alone, nearly double that of last year.
Due to restrictions on travel, and the stock market being closed for Chinese New Year, there may be some negative impact on the crypto market.
He noted that stock market prices on mainland Chinese stock exchanges have been found to be inversely correlated with gaming revenue and visitation in Macau. "Sometimes the stock price and Macau's casino business are negatively correlated," Wang said. "Because if you can't bet on the stock market, you're going to bet your money on the casino."
In addition, American leeks who beat Wall Street may turn their attention to the cryptocurrency market after being disappointed by restrictions on buying stocks on online platforms such as Robinhood.
Whether this means more Chinese will be involved is still unknown.
