What Will Chinese New Year Mean for Bitcoin?

The Year of the Horse is almost upon us!

In Japan it began on 1st January, but now all eyes are turning to China, which begins the new year as influential and unpredictable as ever. Will tomorrow's date have any influence on bitcoin's value? If so, why?

In clamping down on bitcoin exchanges last December, the People's Bank of China set the first day of Chinese New Year (officially 31st January) as the deadline for bitcoin exchanges to completely sever ties with third-party payment processors.

Payment companies were given a verbal warning during a meeting with People's Bank officials in the week of 16th December. Deposit access was shut off almost immediately, with PayPal and Chinese competitors Alipay and TenPay confirming they would comply.

Companies were given until the end of January, however, to clear out any outstanding funds they held for customers to withdraw bitcoins and convert them back into local currency.

It has been reported that all payment processor balances were cleared as of Monday 27th January, giving traders and exchanges plenty of time to adjust before the deadline. Exchanges now use various other methods to move money in and out of their systems, ranging from the use of corporate and personal bank accounts for transfers, to an indirect electronic 'voucher' system.

If the Chinese New Year sees any additional government moves enforcing restrictions on bitcoin, the world could possibly see a value plunge. People involved in the local industry, however, seem unconcerned.

Leon Li, CEO of official market leader Huobi, said the company could do something to deal with a new regulatory environment, adding that "there is a lot of misunderstanding of Chinese government policy about bitcoin."

Bobby Lee, CEO of BTC China, said the exchange would be able to continue processing withdrawals even after the deadline via its banking relationships. He said:

Jack Wang, a Chinese cryptocurrency developer and entrepreneur, has previously analyzed the People's Bank statements for CoinDesk and tweeted that he does not predict any major price surprise.

Not expecting a post CNY Bitcoin dump. News already priced in, and every exchange I've talked to plans to continue operating.

— jackwang (@jackwang) January 25, 2014

Zennon Kapron, of Shanghai-based consultancy Kapronasia, said the exchanges had shown themselves to be adaptable and that any price movement would likely come from those unfamiliar with China.

"Yes, the payment processors will be out, but they were pretty much out right after the announcement in December anyway, and they (the exchanges) pretty quickly found alternative methods of funding," he said.

By contrast, on the laissez-faire streets of Hong Kong, government action did not even register on the radar, as local exchange AsiaNexgen (ANXBTC) celebrated the new year with a bitcoin giveaway.

Lucky residents received HK$500,000 (roughly $65,000) in bitcoin vouchers in what the exchange claimed was the biggest giveaway of the currency to date.

Miniskirted girls

handed out bitcoin paper wallets to passersby, in the form of traditional red envelopes of cash given as new year gifts to family and colleagues.

In locations across the region, the company handed out 50,000 coupons inside the envelopes (known in Mandarin as 'hongbao') which were embossed with the Chinese character for 'luck' in gold.

"We're trying hard to promote bitcoins to the wider Hong Kong community, most of whom do not have bitcoin wallets. This was the easiest way to provide instant access to bitcoins without any complications and minimum confusion," a company representative stated on reddit.

Chinese New Year Image via Shutterstock