China Bitcoin Dominance Drops as Revealed by Pre New Year Price Trend
The Chinese New Year comes up on February 12 2021, just a few days from the time of writing. Based on historic trends, participants in the Bitcoin and cryptocurrency market expected prices to drop. This has been the usual behaviour of the market around this time of the year. This time around, on the contrary, the bullish trend across the markets has continued.
At the time of writing, Bitcoin traded at $43,770.40, representing a new all time high (ATH) price, while Ethereum traded at $1,694.41. Most of the other top cryptocurrencies also posted significant gains in a season where traditionally, participants in the cryptocurrency market expected prices to drop. This is in the anticipation that Chinese miners would be selling off their digital assets ahead of the coming celebration.
A Major Cultural Event
The Chinese New Year, otherwise known as the Lunar New Year is an annual 15-day festival that is celebrated in China and other Chinese communities around the world. The event usually falls between January 21 and February 20 every year according to western calendars. The kick-off of this event depends on when the new moon appears.
Culturally, the Chinese New Year is a major event in China and among Chinese citizens all over the world. The period is characterized by holidays, closing of businesses and homecoming among Chinese families. This event has been likened to the Christmas period among western cultures, therefore the shutting down of businesses and recouping of funds is a normal occurrence during this period.
In previous years, the actions of Chinese participants in the industry, especially miners, always had a significant impact on the Bitcoin and cryptocurrency market. In 2017, the event fell on January 28. Prior to this date, Bitcoin had crossed the $1,000 mark for the first time, achieving a new ATH. Few days before the beginning of celebrations, the price of Bitcoin dropped to around $800, but picked up again immediately after celebrations were over.
In 2018 a similar trend occurred when Bitcoin price fell from $9,471.46 to $5,947.40 during the 14-day period of celebration. Again in 2019, the cycle was repeated as Bitcoin price dropped to $3,346.14 from a seasonal high of $3,648.50. 2020 was not different either, with price dropping from $9,181.97 to $8,220.87.
Something Different is Happening in 2021
The year 2021 has been different, as prices have rather continued in an upward direction, despite the Chinese population maintaining their routine tradition. For instance, distribution of gifts, closing of businesses, the culture of cashing out on investments have not changed. According to Alex Zuo, vice president of China-based crypto wallet Cobo;
Chinese traders tend to withdraw their crypto assets and cash out during this period. It is just like how people in the U.S. would take profit from stock holdings before Christmas.
The difference this time around is that the usual effect of these activities on the overall market is missing this time around. The argument over this development is that the most recent bull run has been driven by participants outside of the Chinese region. Investors in the U.S and Europe have been responsible for the recent upward price movement in the Bitcoin and cryptocurrency marketplace.
Apart from institutional investors entering the market, strict regulation in China has also caused Bitcoin miners to migrate to other friendly environments, especially the Nordic regions. Therefore, a slowing down of activities in China this time around is no longer having the kind of effect that it has had on the markets in previous years.
A Display of Industrial Maturity?
From a wider perspective, this should be seen as market maturity for the decentralized Bitcoin and cryptocurrency marketplace. It satisfies the original intention and philosophy of Satoshi Nakamoto, which supports an ecosystem that is not susceptible to the actions of a faction of the community.
Originally, China’s dominance may not have arisen as a result of deliberate interest. Rather it was most likely because of how the Chinese population adopted Bitcoin and emerging technologies in the early stages. Also, the relatively lower cost of electricity and conducive weather supported the situation of most of the mining farms in China.
Recent events have shown that the dominance of China in the Bitcoin and cryptocurrency has dropped. This is as a result of rising interest in the industry from other parts of the world, and Bitcoin finding its way deeper into the mainstream. Perhaps, down the road, there will be a time when particular events would not trigger elaborated volatility in the markets anymore. Just like we are seeing with the Chinese New Year this time around.