Bitcoin had an amazing 2017, increasing in value by an eye-watering 1000%. By the middle of December, it had topped the $20,000 mark, and everybody was taking about cryptocurrencies as the new get-rich-quick scheme.
Of course, it couldn’t last, and after two attempts at holding above the magical 20K level, the currency crashed, at one stage slipping below $9000. At the time of writing, BTC is treading water around 10K, and has basically lost half its value, with other cryptocurrencies following a similar price pattern.
The question for crypto traders now is, should they sell their position, buy more, or HODL their stash in expectation of another price rise in 2018?
Well the HODL crowd do have recent history on their side. For the past 5 years, like clockwork, Bitcoin has fallen in the weeks approaching the Chinese New Year, before rising like a phoenix once the celebrations are over. Since 70% of BTC mining happens in China, and many wealthy Chinese use Bitcoin and other cryptocurrencies as a way to hide their wealth from the authorities, then China is a major player in the crypto markets.
As Chinese New Year approaches, these players tend to sell some of their holdings in order to fund the extravagant celebrations that Chinese love so much. Once the New Year is over, then they get back to work of mining and stacking their Bitcoins, leading to price hikes in the spring, summer and autumn.
When is Chinese New Year this time round?
In 2018, the Year of the Dog begins on February 16th. So, if past price behaviour is any guide (and it has been a super indicator for 5 years on the trot), then this is the perfect time to be buying more Bitcoin and other cryptos.
On the other hand, there is a school of thought that says that things really are different this time. These crypto sceptics point out that governments are starting to look at BTC as a taxable instrument, as well as investigating them as possible vehicles for fraudulent and even criminal activity. While it is true that in theory, the blockchain technology is anonymous, much of the recent money flowing into cryptos has been using exchanges like Coinbase, where you have to submit forms of ID in order to start trading.
Add in the new factor of futures trading on Bitcoin being made possible in Chicago, and it is doubtful just how much longer the Chinese can really dominate trading volumes. Now the big banks and hedge funds can open and liquidate BTC positions at the blink of an eye, so it might not matter so much what the mining operations in China are getting up to.
Finally, crypto sceptics raise the excellent point that Bitcoin transactions have become increasingly expensive and time-consuming, and several online stores have given up on using it as a payment option.
So, who is right?
In our opinion, the Chinese New Year price pattern should have one more cycle left in it before government interference and futures trading make it no longer viable.
However, Bitcoin is now old technology, and faster, more flexible coins such as Litecoin and Ethereum offer much better promise as a means of exchange.
Our tip: Buy Ethereum (ETH) in early February, but don’t mortgage the house, and just use money you can afford to lose.
Did you manage to get in early on the Bitcoin trade? Are you invested in other cryptos, like Litecoin or Ethereum? Will you take advantage of this dip in prices to buy more virtual currency?
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