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The price trend of Bitcoin in January every year is very "crazy", which is basically the worst performing month of Bitcoin in the year; in the days (or even weeks) before and after the Spring Festival, a large amount of Bitcoin may be exchanged for cash through P2P and over-the-counter (OTC) platforms; due to the postponement of the holiday caused by the epidemic, the stock market will have to wait until the end of the holiday to reopen, so many people have begun to pay attention to the 24*7 cryptocurrency market.
The translation is as follows:
The Lunar New Year of the Rat is coming to an end. Judging from the Bitcoin market dynamics during this period, it seems that the "price massacre" predicted by some people has not occurred. On the contrary, the price of Bitcoin has increased significantly. According to ChainDD (WeChat: ChainDD), at the time of writing this article, CoinMarketCap data showed that the price of Bitcoin has reached $9,329.50, with a market value of nearly $170 billion, exceeding the market value of management software solution provider SAP and almost equivalent to the company market value of enterprise software giant Oracle.
In fact, in the past five years, the price of Bitcoin has fluctuated greatly in January every year, and from the historical data, the price trend in January of each year is also very "crazy", which is basically the worst performing month of Bitcoin in the year. If we analyze the price data from 2014 to early to mid-January 2019, we will find that the price of Bitcoin generally fell by 15%-50%, and this volatility also caused the price of Bitcoin to usually fall to the lowest value of the year in January.
Why does the Bitcoin market fluctuate due to the Lunar New Year?
Is it all because of the red envelope culture?
In fact, there are several speculations on the market about the impact of the Lunar New Year on Bitcoin prices, one of which is the so-called "red envelope culture". The community believes that millions of red envelopes containing cash are sent out as gifts every Lunar New Year, and the cash amount is usually in multiples of 50 or 100.
Therefore, many people feel that Chinese investors may withdraw their stored Bitcoin and prepare funds for the red envelopes for the Chinese New Year. Since about 2 billion Chinese people around the world celebrate the Lunar New Year, this may lead to a large number of Bitcoins being exchanged for cash through P2P and over-the-counter (OTC) platforms in the days (or even weeks) before and after the Spring Festival. This scale and sustained sell-off is enough to change the supply and demand relationship in the Bitcoin market, causing Bitcoin prices to fluctuate with changes in trading volume.
So the question is: Does the Spring Festival really affect the price of Bitcoin?
According to statistical analysis conducted by blockchain practitioner Phoon Mei Hui, there is indeed some evidence that "the Spring Festival may affect the price of Bitcoin" because there is a strong correlation between price behavior and changes in trading volume in the days before and after the Lunar New Year. Similarly, EconomyMonitor Chief Scientist Percy Venegas also found based on earlier analysis that in the days and weeks before the Spring Festival, there was a significant increase in the activities of WeChat, QQ, CoinCola and BitcoinWorld. These applications are basically more or less indirectly related to Bitcoin fluctuations, so once their performance becomes active, it means that Bitcoin trading activity is likely to increase.
BitMEX CEO Arthur Haynes also seemed to agree that the Spring Festival might affect Bitcoin prices. He tweeted:
“Every year starts in January, and this is likely when Bitcoin volatility and trading volumes change dramatically.”
However, some people in the crypto community believe that the "Spring Festival may affect the price of Bitcoin" is just a "red herring fallacy" and that the frequent fluctuations in the price of Bitcoin in January are just a coincidence. (ChainDD Note: The red herring fallacy refers to inserting an irrelevant topic in a certain way to divert the other party's attention and discussion direction to another topic, thereby winning the debate. Herring is a kind of fish that is not originally red. After being pickled and smoked, it becomes dark red with a strong smell. People put smoked red herrings in places where foxes are present to test the searching ability of hounds. Later, people used red herrings to represent false clues or forged facts proposed to confuse opponents.)
Since the Bitcoin market has fluctuated every Chinese New Year over the past five years, it is natural that some people "predict" that the situation will not change much this year, so some traders choose to sell early to prevent further losses from subsequent market declines. However, this idea of cashing out early may trigger a chain reaction and generate a wider sell-off, causing a sharp drop in Bitcoin prices. But is this the case for the Lunar New Year in 2020?
What happened to the Bitcoin price during the 2020 Spring Festival?
Crypto trader and economist Alex Krüger believes that Bitcoin's dynamics during the Lunar New Year this year may be different from previous years, as data shows that Bitcoin prices perform relatively normally before the Chinese New Year.
However, during the Spring Festival holiday from January 23 to January 30, the price of Bitcoin "abnormally" soared, soaring from $8,400 to nearly $9,500 in less than seven days. Bobby Ong, co-founder of CoinGecko, believes that the recent new coronavirus may be the reason for the abnormality in the Bitcoin market. This view seems to coincide with Su Zhu, co-founder of Singaporean crypto investment company Three Arrows, who believes that due to the postponement of the holiday caused by the epidemic, the stock market needs to wait until the end of the holiday before reopening, so many people have begun to pay attention to the 24/7 cryptocurrency market.
However, Samuel Lee, a financial advisor at Chicago-based asset management firm SVRN Asset Management, believes that the cryptocurrency market itself is rather special and therefore cannot be analyzed using traditional thinking. Although the new coronavirus outbreak will bring about a certain degree of market reaction, its impact is still relatively small compared to geopolitical events such as the US-Iran conflict.
Not only that, it is too early to assert that the Bitcoin market has entered a bull market, because generally speaking, Bitcoin needs to stay above the $9,000 resistance level or the 200-day moving average for a period of time before it can be determined that the market is in an upward phase. Will this trend continue in 2020? We may soon see the answer. |
