by Rushali 
The Chinese New Year is on Feb 12. But unlike in previous years, some analysts and traders say the “Chinese New Year Dump,” a belief bitcoin’s (BTC) price would drop around the holiday period, will not take place this year. Many analysts believe that this year’s bull run is fueled by the institutional investors of Europe and the US, that’s why this year the prices will not drop in the holiday season.
Concern about the Chinese New Year’s effect is compounded by data showing at least a handful of miners in China sold their bitcoin in January. Some speculate the selling was triggered by bearish sentiment ahead of the new year.
Alex Zuo, vice president of China-based crypto wallet Cobo, has said “Chinese traders tend to withdraw their crypto assets and cash out, it is just like how people in the U.S. would take profit from stock holdings before Christmas.”
Felix Wang, the managing director, and partner of investment research firm Hedgeye Risk’s China business has also said that “There’s a decades-old tradition of giving out money, or ‘red packets,’ to family and friends and special people of interest [in China] during Chinese new year, they need cash so they need to liquidate some of their financial holdings, and that could lead to a little bit of pressure in some of the financial markets.”
In China, every kind of office is closed for a week during the new year, so liquidity also becomes a problem. Decreased liquidity and increased withdrawal activities exposed the market to higher price volatility risks. Trading data from TradingView on Binance’s bitcoin/USDT (tether) pair shows that in each of the past three years, bitcoin’s price went down before the Chinese New Year.
But in the year 2021, many traders are holding their bitcoins for a long-term basis.
Cynthia Wu, head of business development and sales at Hong Kong-based crypto trading service firm Matrixport, said she has not noticed any significant uptick in bitcoin selling from her company’s miner clients, other than a minor increase as the holidays approach.
Mining companies “need to pay annual bonuses to their employees” around Chinese New Year, Wu said. “It is just simply a seasonal behavior.”
Lei Tong, managing director of financial services at Hong Kong-based crypto lender Babel, has told in an interview that the company has been paid back by few China mining companies, an indication these miners have not sold a large number of their bitcoin holdings yet. Babel allows bitcoin mining firms to use their machines as loan collateral, as CoinDesk reported previously.
At crypto exchange OKEx, Robbie Liu, market analyst at OKEx’s research arm OKEx Insights, explained that there have been no “unusual fluctuations” in the exchange’s USDT/Chinese yuan rate recently, and there have not been any liquidity problems this year so far.
China’s crypto traders who are using over-the-counter (OTC) have been facing an issue in liquidating their crypto holdings. This can be a reason that traders are holding their assets.
On Feb 5, China-based blockchain analysis firm PeckShield has published an anti-money laundering report and according to that, Unregulated digital currency outflows, worth a total of $17.5 billion in 2020, were up 51% from 2019.
A representative from PeckShield has said that some crypto users on major crypto exchanges could have found their bank accounts frozen because their OTC transactions may have accidentally participated in money laundering activities without realizing it.
“These accounts were ‘contaminated’ and, therefore, they were eventually temporarily frozen by the Chinese authorities,” the representative said.
Due to Covid 19, this government has some regulations related to n traveling around the holiday time in the country. Some say the uncertainty around the COVID-19 restrictions during the holiday season could have an impact on the crypto market.
Data from a December report by the China Securities Depository and Clearing Corporation shows there are more than 1.6 million newly registered individual stock investors in China in December alone, nearly double the number of the previous year.
What will happen during the holiday season is something which the market will look for.
