Bitcoin slump got you down? Blame the lunar calendar, analysts say

Bitcoin has been falling precipitously this week, dropping double-digit percentages Tuesday and Wednesday and temporarily falling to below the $10,000 mark for the first time since early December.

While many are blaming possible regulatory crackdowns from South Korea and China, others are blaming something more cosmic: the moon.

More accurately, cryptocurrency analysts have pinned the bitcoin slump to the advent of Chinese New Year, which goes by the lunar calendar and falls on Feb. 16. With Chinese New Year coming up, some believe that the slump is possibly due to the Chinese swapping their bitcoins for fiat money in preparation for the major holiday.

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Last year, bitcoin’s market peaked at $22 billion Jan. 5 but bottomed out at $14 billion a week later. Chinese New Year that year was on Jan. 28.

China is a bitcoin powerhouse, with 98 percent of all bitcoin trades in the last six months used the Chinese Yuan currency, according to Reuters. It also hosts some of the largest bitcoin mines, which are electrical farms made of computers that compute complex math problems to add more bitcoin to the market.

But during Chinese New Year, the Chinese also like to exchange cash in little red envelopes. The volume of exchanges is staggering, even via digital red envelopes. During last Chinese New Year, Chinese users of the wildly popular WeChat messaging platform sent 46 billion digital red envelopes to one another.

One analyst noted that for four of the past five Januaries, bitcoin’s price took a major hit due to a significant sell-off.

“China’s new year is fast approaching, cryptocurrencies are very popular among Chinese people, and it is a popular explanation that Chinese bitcoin enthusiasts sell some of their holdings at this time of the year to pay for presents, parties and long trips home,” wrote Financial Times’ investment columnist John Authers.

However, Authers poked holes into this theory, saying that China’s stock exchange has not seen any downturns in the month of January due to a sell-off and that the cost of celebrating Chinese New Year needed to go up exponentially to make the math fit.

Bitcoin’s recent tumult is largely credited to the expected crackdowns by Chinese and South Korean authorities.

China banned initial coin offerings — a crowdsourced form of IPO for startups using cryptocurrencies — in September and earlier this week called on local exchanges to stop trading in cryptocurrencies. It also announced plans to crack down on bitcoin mining in the country and closing domestic access to online platforms and cryptocurrency apps.

South Korea, another hotbed for bitcoin activity, announced steps to crack down on bitcoin this week, such as banning anonymous bitcoin accounts and even all cryptocurrency trading.

South Korean and Chinese authorities argue that unregulated cryptocurrency trading has “has started to resemble gambling and speculation” and that it may be a venue for money laundering and tax evasion.

In South Korea, the proposal to ban anonymous accounts has generated a particularly vocal backlash by bitcoin owners. More than 200,000 people signed a petition pleading against cryptocurrency regulation.

“Our people have been able to make a happy dream that they have never had in Korea because of virtual money,” reads the petition, according to CNBC. “I wish that the economy will not decline due to unjustifiable regulations in the present situation.”

Photo: A pile of bitcoin slugs sit in a box in 2013. (George Frey/Getty Images)

 

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