Every year, China celebrates her New Year a few months after the Nigerian New Year festival.
The time of celebration varies between these countries because China operates a lunar calendar; a calendar based on the lunisolar calendar whose months are based on the cycles of the moon and the sun.
Every year, when the China New Year holiday begins, the price of cryptocurrency is usually affected.
For instance, in 2017, the price of Bitcoin dropped from $12,000 to $6000 while it experienced a steady fall from $4000 to $3350 in 2019.
This was also repeated in 2020 when Bitcoin dropped from $8.3k to $8.5k a few days after the holiday started.
This shows that the Chinese holiday always has effects on the price of Bitcoin with extension to other digital currencies.
For 2021, Chinese New Year is expected to run between February 12- February 15 with the holiday being for two weeks.
What is amiss?
This trend does not fail to raise eyebrows as history repeats itself every year.
This has led experts to analyze the reasons behind the yearly occurrence.
During the holiday, market makers and trading bots operating in China and other Asian countries will shut down for 3-5 working days.
Even though market makers can be automated through the use of trading bots, it, however, requires human supervision in case it begins to malfunction.
The shutdown of market-making operations will limit the liquid in the crypto market while increasing volatility.
Also, festive periods speak the same language everywhere. To many, it is a time to enjoy and take a break from the daily stress of work while spending time with family and friends.
In China, the New Year festival is widely known as a time ‘cash out.’ During the festival, people are expected to be generous to both young and old.
In fact, ‘red packets’ (a pocket full of cash) are given to both young and old to signify luck and prosperity.
This is the only time that giving out cash is not taboo in China. Due to the amount of cash that is required to celebrate the new year, there is always an increase in sell orders which leads to market saturation and a resulting fall in market price.
However, it seems the Chinese market dump happened earlier this year before the holiday commenced.
This can be seen in the price of Bitcoin within the last three days after breaking an all-time high of $48,000 earlier this week.
Since then, it has experienced a fall to as low as $44,000 with a recent increase towards the level of all-time high it experienced earlier this week.
Apart from the recent fall, it experienced, the price of crypto may keep soaring higher as the new Chinese holiday may no longer affect; since it happened earlier.
The only result would be a slow drift and movement between rising and fall without any massive move.
Although China and some Asian countries are contributors to Bitcoin mining, the holiday will not have any effect on Bitcoin mining as the process does not require significant manpower; only the computer networks that solve puzzles will be rewarded.
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