Bitcoin rallies amid Lunar New Year and despite bearish capital flows

Crypto markets have had a strong start to the year. As of 26th of January, Bitcoin is up 39% year-to-date and the timing coincides with a period when Bitcoin has never failed to rally, despite a largely bearish sentiment dominating the end of 2022.


A recent report by digital assets financial services platform Matrixport highlights that if history is anything to go by, Bitcoin investors can expect an average return of 9% during the Chinese New Year. The Chinese New Year, also known as the Spring Festival or Lunar New Year, is an important traditional holiday celebrated in China and other Asian countries. It is considered the most important holiday of the year in Chinese culture and is typically a time of increased spending and economic activity. The Chinese New Year is a time when many Chinese people may have more disposable income due to holiday bonuses, and they may choose to invest some of that money in assets such as Bitcoin.


While past returns do not guarantee future performance, Markus Thielen, Head of Research at Matrixport, notes that the “beginning of the Chinese New Year has been an attractive entry timing for long positions.” However, not all data points to a bullish outlook for crypto. A report issued on Monday by digital asset investment firm CoinShares highlights that of the $37.8 million in inflows into crypto products last week, more than two-thirds  (68%) were into short investment products. The US were particularly bearish with 95% of their inflows being allocated to short investment products.

The crypto community is split regarding future outlook. With such a bearish culmination to 2022, a January rebound does not mean that investors are in store for a prolonged market recovery. Data is important when it comes to how markets unfold, and the CoinShares report suggests that a significant amount of capital is still betting in a bearish direction. On the other hand, the price movements of the past month are undoubtedly promising and confidence has been recovering as a result.