The crypto market is likely to experience high volatility with the Chinese New Year

Chinese New Year will take place this Sunday, January 22, and will mark the start of a week-long holiday in China. This event is often accompanied by high volatility in the crypto market.

Called “Golden Week”, it is the most important Chinese holiday in China. Each year one of the twelve animals of the calendar is celebrated, with 2023 being the “Year of the Rat”. Thus, Shanghai and Shenzhen stock exchanges will be closed from next Monday to Friday (January 23-27), what will affect the stock and crypto markets, due to the massive volumes that will be drawn from global markets.

The Lunar Year of 2022 caused the price of Bitcoin to rise

The Chinese New Year of 2022 (ie the Year of the Tiger) began on Tuesday 1 February (green arrow in graph lower). Therefore, the golden week ran from February 1 to 8 (in dark gray).

of bitcoin price (BTC) has increased significantly during that week, but then suffered a rapid decline, losing all of its previous gains.

That said, the most interesting element of this period is the massive increase in relative volatility, which led to a near six-month high on February 8, 2022 (green circle), the last day of the “golden” week.

As indicated above, the low volume (black arrow) seen during this week may explain this volatility.

Knowing that Bitcoin subsequently lost all of its gains, we cannot conclude that Golden Week had any lasting effect on the price of the crypto asset. That said, its increased volatility at the moment could present a wealth of opportunities for day trading.

BTC/USD per day. Source: TradingView

2021: low volume and medium volatility

In 2021, the Chinese New Year (year of the Ox) began on Friday, September 12 (green arrow in graph lower). The price of Bitcoin rose over the next seven days, peaking two days after Golden Week (highlighted in dark gray), February 21. Like 2022, the asset lost all its gains soon after.

The golden week was further characterized by very low volume (black arrow), which eventually increased during the subsequent price decline (red arrow).

Interestingly, volatility was not as high as in 2022. It was actually slightly below average (red circle). This can be explained by the fact that it is then at an extreme level before the new year, and therefore the relative volatility has not increased. This data is confirmed when looking at volatility in absolute terms (green circle), which reached an extremely high level of 3100 points.

BTC/USD per day. Source: TradingView

To finish, Therefore, the week after Chinese New Year is historically associated with very low volume and moderate to high volatility for Bitcoin and, by extension, the entire crypto market.

This phenomenon is probably explained by the closing of the Chinese stock exchanges; thus, due to low volumes during this period, prices move more easily.

Interestingly, in 2021 and 2022 the price of Bitcoin rose sharply before losing all its gains thereafter.

Moral of the story: when the Chinese rat comes out of hiding, Bitcoin jumps.


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