The lunar Chinese language New Yr this yr is on Feb. 12, proper across the nook. However not like 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, won’t happen this yr. Why? The affect of retail merchants in China has been lowered.
Some argue the “Chinese language New Yr dump” won’t 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 can 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 very 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 property and money out,” Alex Zuo, vice chairman of China-based crypto pockets Cobo, informed CoinDesk. “It is rather like how folks within the U.S. would take profit from stock holdings earlier than Christmas.”
“There’s a decades-old custom of giving out cash, or ‘pink packets,’ to household and pals and particular folks of curiosity [in China] throughout Chinese language new yr,” defined Felix Wang, managing director and companion of funding analysis agency Hedgeye Threat’s China enterprise. “They want money so they should liquidate a few of their monetary holdings, and that might result in just a little little bit of strain in a number 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 folks within the Larger China area take at the very least 5 days off to reunite with their households and have a good time the vacation.
Knowledge compiled by CoinDesk Analysis reveals the buying and selling volumes on Binance, Huobi and OKEx – the preferred crypto exchanges catering to prospects in China – have 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 analyzing 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 folks 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 could be 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 pattern, seem like holding their BTC into the brand new yr.
Cynthia Wu, head of enterprise growth and gross sales at Hong Kong-based crypto buying and selling service agency Matrixport, informed CoinDesk she has not seen any vital uptick in bitcoin promoting from her firm’s miner purchasers, aside from a minor enhance as the vacations method.
Mining firms “have to pay annual bonuses to their staff” round Chinese language New Yr, Wu mentioned. “It’s simply merely a seasonal habits.”
Lei Tong, managing director of economic providers at Hong Kong-based crypto lender Babel, informed CoinDesk the corporate has been paid again by few China mining firms, a sign these miners haven’t offered a considerable amount of their bitcoin holdings but. Babel permits bitcoin mining corporations to make use of their machines as mortgage collateral, as CoinDesk reported beforehand.
At crypto trade OKEx, Robbie Liu, market analyst at OKEx’s analysis arm OKEx Insights, informed CoinDesk there have been no “uncommon fluctuations” within the trade’s USDT/Chinese yuan rate lately, and there haven’t been any liquidity issues this yr to this point.
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” resembling cashing out, mining pool F2Pool’s co-founder, Shixing “Discus Fish” Mao, informed 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 pattern 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 purpose fewer persons are cashing out forward of New Yr’s, mentioned people who find themselves aware of the matter.
As CoinDesk reported beforehand, Chinese language crypto traders utilizing OTC retailers have confronted 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 forex outflows, value a complete of $17.5 billion in 2020, have been up 51% from 2019, based on an anti-money laundering report printed on Feb. 5 by China-based blockchain evaluation agency PeckShield.
A consultant from PeckShield informed 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 by chance participated in cash laundering actions with out realizing it.
“These accounts have been ‘contaminated’ and, due to this fact, they have 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, based on PeckShield. China’s central financial institution and the State Administration of Overseas Alternate issued a new notice recently to additional information banks on the best way to function their cross-border companies, tightening the clampdown on cash laundering and terrorist financing.
Notebly, at the very least one key Huobi government remains to be 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 prone to have your financial institution accounts frozen this yr when the transactions contain these OTC retailers.”
COVID-19 stays a wild card
Although the coronavirus pandemic is being handled as if it have been properly beneath management in China in contrast with most Western nations, 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 powerful retail curiosity in Chinese language monetary market since December as a result of an eagerness to put money into 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 folks can not journey and the inventory market is closed in the course of the vacation week, based on Wang, there might be some damaging 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.
“Generally there’s an inverse correlation [between stock price and Macau’s casino business],” Wang mentioned. “As a result of in case you can’t guess on the inventory market, you go gamble your cash in casinos.”
One attainable signal of issues to come back might have been what simply occurred within the U.S., the place retail inventory merchants rushed to crypto after they have been pissed off by the restrictions on their inventory shopping for on on-line platforms resembling Robinhood.
Whether or not meaning extra folks in China might flip to crypto buying and selling in the course of the vacation season stays unclear.