According to Bloomberg, Bitcoin's recent surge to $50,000 has been linked to a seasonality effect in the crypto market, as the digital asset tends to move higher in light trading around the Lunar New Year. The cryptocurrency's comeback to its highest levels in over two years is closely associated with the US approval of spot Bitcoin exchange-traded funds (ETFs) last month. However, the excitement surrounding Bitcoin ETFs seems to have already diminished, with the average daily trading volume in the crypto market falling to $113 billion so far this month, down from around $149 billion in January, according to crypto trading data firm CCData.
The drop in trading volume is likely due to the Chinese New Year holidays, when many people in the Asia Pacific region travel and spend time with family and friends. Bitcoin reached the $50,000 milestone on February 12, two days after the official new year began, with holiday celebrations often lasting for a week or longer. Historically, Bitcoin has experienced an increase just before or after the Lunar New Year. Light trading can exacerbate price swings in both directions, and the Chinese New Year money gifting tradition contributes to a more positive sentiment.
CCData also noted that January's volume was inflated due to the Bitcoin ETF hype but still low compared to the historical average. The average daily volume has been around $198 billion since January 2021, according to Joshua de Vos, research lead at CCData. However, volume during the Lunar New Year holidays has been significantly lower compared to the rest of the year, supporting the thesis that the Chinese Lunar New Year does seem to materially depress average daily volumes.
