For centuries, the Chinese have been celebrating the start of the Lunar New Year with traditional festivities, but in recent years, there has been a growing correlation between crypto and the event. From Bitcoin’s emergence in 2009 to its continued growth over time, cryptocurrencies have become an increasingly popular option for creating and storing wealth during these special occasions. This article explores this connection, which focuses mainly on the effect it has had on businesses and governments worldwide.
The Chinese Connection with Crypto
Cryptocurrency was quickly introduced to the Chinese population in 2009 when Bitcoin was created. It quickly became a popular form of investment for them over the years despite the rocky treatment of their government with cryptocurrencies. In fact, China is considered to be the 10th in the 2022 top global crypto adoption index of Chainanalysis.
To date, Bitcoin, as well as a number of other popular cryptocurrencies, are reportedly banned. Despite China’s hostile behavior over it, David Lesperance of Lesperance & Associates law firm asserts in an interview with Cointelegraph that the Chinese government never overtly prevented individuals from holding and trading them, so it remains safe to hold and trade them within the country.
The Significance of Gold and Crypto in the Chinese New Year
In Chinese culture, gold is thought to be the harbinger of great luck, fortune, and prosperity. In addition to representing the power of royalty throughout China’s history, yellow and gold hold a special meaning in their religion as well.
These colors are always prominently featured during New Year festivities due to their grand symbolism for good tidings in the coming year. Gold stands out among other hues as a beacon of hope that will help guide them throughout the coming year.
Now how does this piece of information relate to crypto? Well, both commodities are considered to be effective hedges against inflation and have recently been closely linked with each other over the years.
In spite of their poor performance in the previous year chiefly due to the rallying value of the US dollar. A bull run is expected for them this year, and as early as January, this prediction is gradually holding water. The current trend has already seen gold gaining a positive momentum since November 2022 while Bitcoin and other crypto prices are likewise slowly recovering their lost value over the bear market from the last half of 2021 up to last year.
Digital assets, particularly crypto, are liquid similar to gold. However, technological advancements and increasing levels of Internet connectivity have paved the way for their wider accessibility and lower minimal transaction fees. Their decentralized nature and the potential of their investors to remain anonymous further make them more attractive to investors. All these basically make crypto potentially more appealing storage of wealth compared to gold nowadays.
The Behavior of Bitcoin and Other Cryptos on This Occasion
For the most part, Bitcoin and other cryptos tend to drop during the Lunar New Year. According to Boxmining, their tanking prices on this occasion are attributed to a decrease in trading volume, market makers going on a holiday break, and more people cashing in on their earnings.
The festivities tend to lead to a decrease in crypto trading during the week-long celebration leading to the event. This can be due to many Chinese crypto holders opting to get their focus on the celebration of the New Year while others are opting to hold their investments amid the price drops to prevent losses.
Most crypto-related business owners, investors, and traders also tend to stay away from their respective platforms in favor of spending some quality time with family members. Asians, particularly the Chinese, enjoy close family ties that even extend to relatives. Thus, they have a habit of spending special events, including the Lunar New Year, with each other.
Finally, more people usually take this opportunity to convert their digital funds into physical cash or other forms of liquid assets to be used to enjoy the different activities offered by the occasion.
All these sudden surges in the demand for liquidity puts pressure on the market, which makes it prone to drops in prices during the Chinese New Year.
The Chinese New Year has been a popular time for celebrations around the globe, but it is becoming increasingly clear that its effect extends beyond traditional festivities. This can be seen as a cue to potential investors when to buy or sell leading to or during the event.
The aforementioned points are important to consider when trading cryptocurrencies. Traders should always be aware of the current trends and any potential changes in the market that could affect their strategies during the process though.
Overall, we believe that investing in well-established cryptos — such as Bitcoin, Ethereum, Tether, and Dogecoin — remains a viable option for wealth preservation despite the negative correlation of cryptocurrencies with the Chinese New Year. This type of commodity has proven its worth over time, so it is still worth considering during these times of celebration as long as investors exercise vigilance and proper risk management efforts along the way.
Giancarlo is an economist and researcher by profession. Prior to his addition to Blockzeit’s dynamic team, he was handling several crypto projects for both the government and private sectors as a Project Manager of a consultancy firm.