The start of a one-week national holiday in China, often accompanied by high market volatility, could affect Bitcoin and other coins.
Assets can increase volatility
cryptocoin.com ‘golden week’ is the biggest national holiday in China. One of the twelve animals is accompanied each year, and 2023 will be the ‘Year of the Rat’.
Both the Shanghai and Shenzhen Stock Exchanges will be closed from Monday to Friday (January 23-27). This will affect the stock market as large volumes are taken from global markets. As a result, this can increase volatility as assets are more easily manipulated. Also, profits are usually made in the days before the New Year, because people often need cash to buy gifts.
led to bitcoin rally
2022 Chinese New Year (Year of the Tiger) started on Tuesday, February 1 (green icon). Therefore, the week of February 1-8 was golden week (highlighted). Bitcoin (BTC) price increased significantly this week, but then fell sharply, losing all of its previous gains.
However, the most interesting development during this period was the large increase in relative volatility, which reached a nearly six-month high on February 8 (green circle), the last day of the golden week. As stated earlier, low volume (black arrow) during this week could have been a reason for the volatility.
We cannot say that the “golden week” had a long-lasting effect on the price of the digital asset, as the Bitcoin price lost all of its gains afterwards. But the increased volatility presents a multitude of opportunities for day trading.
BTC price has risen for seven days
The 2021 Chinese New Year (Year of the Ox) started on Friday, February 12 (green icon). The BTC price surged for the next seven days and peaked two days after the gold week (highlighted), specifically on February 21. Like 2022, it has since lost all its gains. The golden week was characterized by very low volume, which recovered in the ensuing decline.
Interestingly, volatility was not as high as in 2022. It was even slightly below average (red circle). One possible reason for this may be that there is excessive pre-New Year volatility and therefore relative volatility is not rising. This is confirmed by looking at volatility in absolute terms (green circle), which has an extremely high value of 3100.
As a result, the week following Chinese New Year was historically combined with very low volume and average to high volatility. The main reason for this is probably the closure of Chinese stock markets, which made it easier for prices to move due to low volume levels. Interestingly, in 2021 and 2022, the price of Bitcoin increased significantly before losing all its gains afterwards.
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