The Chinese New Year is held on Sunday (22), marking the start of a week-long national holiday in China, which is usually accompanied by high market volatility.
This is called “Golden Week” and it is the biggest national holiday in China. Each year is accompanied by one of twelve animals, and 2023 will be the “Year of the Rat.”
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The Shanghai and Shenzhen Stock Exchanges will be closed from January 23 to 27. This will affect the stock market due to the massive amounts of volume being taken out of the global markets.
One consequence is that this can increase volatility as assets can be manipulated more easily. In addition, there is often profit-taking in the days leading up to the New Year, as people often need money to buy gifts.
The Lunar New Year 2022 has led to the bitcoin rally
The Chinese New Year 2022 (Year of the Tiger) started on Tuesday, February 1 (green icon). Therefore, the week from February 1 to 8 was Golden Week (highlighted).
Bitcoin (BTC) price rose significantly this week, but then fell sharply, losing all of its previous gains.
However, the most interesting development during this period was the massive increase in relative volatility, which reached a near six-month high on February 8th (green circle), the last day of Golden Week.
Decreased trading volume (black arrow) during this week may be a cause for volatility.
Since the price of Bitcoin lost all of its gains after that, we cannot claim that the “Golden Week” had a lasting effect on the price of the digital asset. However, the increased volatility provides endless opportunities for day trading.
2021 was low volume and medium volatility
The Chinese New Year 2021 (Year of the Ox) started on Friday, February 12 (green icon). BTC price rose over the next seven days and peaked two days after the golden week (shaded) on February 21st. As in 2022, he subsequently lost all his winnings.
The Golden Week was marked by a very low volume (black icon), which increased in the next low (red icon).
On the other hand, volatility was not as high as it was in 2022. In fact, it was just below average (red circle). One of the reasons for this may be that there was extreme volatility before the new year, so the relative volatility did not increase.
This is confirmed by looking at the volatility in absolute terms (green circle), which had a very high reading of 3100.
The week following Chinese New Year has historically had very low volume and medium to high volatility. The main reason for this is the closure of the Chinese stock exchanges, which facilitates price movement due to lower levels of volume.
Interestingly, in 2021 and 2022, the price of bitcoin skyrocketed before losing all of its gains after that.
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