The lunar Chinese language New Yr this yr is on Feb. 12, proper across the nook. However in contrast to in earlier years, some analysts and merchants say the “Chinese language New Yr Dump,” a perception bitcoin’s (BTC) value would drop across the vacation interval, is not going to happen this yr. Why? The affect of retail merchants in China has been decreased.
Some argue the “Chinese language New Yr dump” is not going to occur this yr as a result of institutional traders within the U.S. and Europe have been the primary drivers of the present bull run. That’s in distinction to 2017’s bull market, which was closely powered by retail traders in Asia.
In the meantime, many on Chinese language-language social media platforms are discussing whether or not the present bitcoin bull market could be compelled to pause in the course of the vacation season.
Concern in regards to the Chinese language New Yr’s impact is compounded by knowledge displaying at the least a handful of miners in China offered their bitcoin in January. Some speculate the promoting was triggered by bearish sentiment forward of the brand new yr.
Money is king, particularly throughout vacation season
“Chinese language merchants are inclined to withdraw their crypto belongings and money out,” Alex Zuo, vice chairman of China-based crypto pockets Cobo, instructed CoinDesk. “It is rather like how individuals within the U.S. would take profit from stock holdings earlier than Christmas.”
“There’s a decades-old custom of giving out cash, or ‘purple packets,’ to household and mates and particular individuals of curiosity [in China] throughout Chinese language new yr,” defined Felix Wang, managing director and accomplice of funding analysis agency Hedgeye Threat’s China enterprise. “They want money so they should liquidate a few of their monetary holdings, and that would result in a bit of little bit of strain in a few of the monetary markets.”
Liquidity is one other concern. Most companies are closed in the course of the week of the Chinese language New Yr, together with over-the-counter service and crypto buying and selling desks as a result of individuals within the Better China area take at the least 5 days off to reunite with their households and have fun the vacation.
Information compiled by CoinDesk Analysis reveals the buying and selling volumes on Binance, Huobi and OKEx – the most well-liked crypto exchanges catering to prospects in China – had been down in the course of the Chinese language New Yr interval previously two years. The identical decreased buying and selling volumes additionally appeared in the course of the month October annually, when the Golden Vacation in China takes place.
Decreased liquidity and elevated withdrawal actions uncovered the market to larger value volatility dangers. Buying and selling knowledge from TradingView on Binance’s bitcoin/USDT (tether) pair reveals that in every of the previous three years, bitcoin’s value went down earlier than the Chinese language New Yr.
By inspecting the 14-day value motion as much as the day of Chinese language New Yr over the previous three years, per CoinDesk’s BPI knowledge, bitcoin’s value fell as individuals began taking days off to arrange for the vacation. In 2018, bitcoin’s value dropped to $5,947.40, down 37.2% from a excessive level at $9,471.46 in the course of the 14-day interval. In 2019, for a similar interval, bitcoin’s value fell to $3,346.14, down 8.3% from an earlier excessive at $3,648.50. For 2020, the drop was 10.5%, from $9,181.97 to $8,220.87.
Why 2021 is perhaps totally different
As destiny would have it, the yr of 2021 would be the yr of the ox on the Chinese language lunar calendar, a bullish omen. Whereas some might have offered their bitcoin, numerous merchants and traders in China, betting on a long-lasting optimistic market development, seem like holding their BTC into the brand new yr.
Cynthia Wu, head of enterprise improvement and gross sales at Hong Kong-based crypto buying and selling service agency Matrixport, instructed CoinDesk she has not observed any important uptick in bitcoin promoting from her firm’s miner purchasers, aside from a minor improve as the vacations strategy.
Mining corporations “have to pay annual bonuses to their staff” round Chinese language New Yr, Wu mentioned. “It’s simply merely a seasonal conduct.”
Lei Tong, managing director of economic providers at Hong Kong-based crypto lender Babel, instructed CoinDesk the corporate has been paid again by few China mining corporations, a sign these miners haven’t offered a considerable amount of their bitcoin holdings but. Babel permits bitcoin mining companies to make use of their machines as mortgage collateral, as CoinDesk reported previously.
At crypto alternate OKEx, Robbie Liu, market analyst at OKEx’s analysis arm OKEx Insights, instructed CoinDesk there have been no “uncommon fluctuations” within the alternate’s USDT/Chinese yuan rate lately, and there haven’t been any liquidity issues this yr to date.
As of press time, Binance and Huobi haven’t responded to CoinDesk’s requests for feedback.
“This yr’s market has been very totally different from the previous years’ and we’re seeing very restricted affect from [Chinese] retail merchants’ behaviors” equivalent to cashing out, mining pool F2Pool’s co-founder, Shixing “Discus Fish” Mao, instructed CoinDesk. “The present market is pushed by institutional cash and it strikes with the feelings of those Western establishments. We can not merely come to any conclusions on [bitcoin’s] value’s development primarily based on retailers’ behaviors.”
An added issue: China’s crackdown on OTC desks
China’s crackdown on the over-the-counter (OTC) service is one other potential motive fewer persons are cashing out forward of New Yr’s, mentioned people who find themselves accustomed to the matter.
As CoinDesk reported beforehand, Chinese language crypto traders utilizing OTC retailers have faced challenges liquidating their crypto holdings for money as a result of Chinese language police have been freezing OTC-related financial institution accounts and playing cards amid the Chinese language authorities’s crackdown on cash laundering through cryptocurrencies.
Unregulated digital foreign money outflows, value a complete of $17.5 billion in 2020, had been up 51% from 2019, in line with an anti-money laundering report revealed on Feb. 5 by China-based blockchain evaluation agency PeckShield.
A consultant from PeckShield instructed CoinDesk that some crypto customers on main crypto exchanges may have discovered their financial institution accounts frozen as a result of their OTC transactions might have unintentionally participated in cash laundering actions with out realizing it.
“These accounts had been ‘contaminated’ and, subsequently, they had been ultimately quickly frozen by the Chinese language authorities,” the consultant mentioned.
The crackdown on OTC-related cash laundering actions and so-called “card freeze” motion have continued into 2021, in line with PeckShield. China’s central financial institution and the State Administration of International Change issued a new notice recently to additional information banks on the way to function their cross-border companies, tightening the clampdown on cash laundering and terrorist financing.
Notebly, at the least one key Huobi government is still in custody in China as a result of investigations associated to Huobi’s OTC buying and selling enterprise.
“It was really easy to promote your cryptocurrencies through OTC desks and alter them to Chinese language yuan instantly,” mentioned a supply to CoinDesk, talking on the situation of anonymity due to the sensitivity of the topic. “It’s extremely more likely to have your financial institution accounts frozen this yr when the transactions contain these OTC retailers.”
COVID-19 stays a wild card
Regardless that the coronavirus pandemic is being handled as if it had been nicely beneath management in China in contrast with most Western international locations, a new number of cases previously month has led the Chinese language authorities to place extra restrictions on touring across the vacation time within the nation.
Some say the uncertainty across the COVID-19 restrictions in the course of the vacation season may have an effect on the crypto market.
Hedgeye’s Wang, whose analysis work concentrates on the Chinese language equities markets, sees new and robust retail curiosity in Chinese language monetary market since December as a result of an eagerness to spend money on China and a “flurry” of IPOs from Chinese companies.
Data from a December report by the China Securities Depository and Clearing Company reveals there are greater than 1.6 million newly registered particular person inventory traders in China in December alone, almost double the variety of the earlier yr.
As a result of individuals can not journey and the inventory market is closed in the course of the vacation week, in line with Wang, there may very well be some unfavourable affect on the crypto market.
Wang notes an that inventory market costs Chinese language mainland-based inventory exchanges have been discovered to maneuver in the other way of Macau’s playing revenues and visitation.
“Typically there’s an inverse correlation [between stock price and Macau’s casino business],” Wang mentioned. “As a result of in the event you can’t wager on the inventory market, you go gamble your cash in casinos.”
One doable signal of issues to come back might have been what simply occurred within the U.S., the place retail stock traders rushed to crypto once they had been pissed off by the restrictions on their inventory shopping for on on-line platforms such as Robinhood.
Whether or not which means extra individuals in China might flip to crypto buying and selling in the course of the vacation season stays unclear.