After the Lunar New Year: Profit-Taking Impacts Crypto and Chinese Stocks

After a week-long Lunar New Year break, cryptos and Chinese equities saw their bull market performance decline, leading to speculation of profit-taking.

The CSI 300 index, which tracks the largest Chinese stocks listed on the mainland, initially rose but failed to maintain momentum, ending the day just half a percent higher.

Performance of Chinese stocks after the Lunar New Year

Many analysts believe the slight pullback is a healthy pause after three months of gains, with the CSI 300 index up 19.88% from its October 2022 low. However, there are still negative factors in game, including the Biden administration’s tech war on Beijing, Covid infections, a widespread economic downturn and a housing crisis.

In the US, Chinese equities also saw a decline in pre-market trading, with internet ETF KraneShares CSI China falling 4%.

The latest Bank of America survey showed that long Chinese stocks were on the list of the most crowded trades this month, indicating that investors could take profits after a long period of gains.

Cryptos also take a hit

The crypto market has also experienced a slight declinewith Bitcoin and other cryptocurrencies wiping out gains after a weekend rally. The price of Bitcoin has fallen less than 1% in the past 24 hours to $23,250, after hovering around $24,000 over the weekend as Chinese traders returned to their offices.

The the reaction of the crypto market after the end of the Chinese New Year has been shuffled through history. Some years have seen an increase in crypto prices, while others have seen a decline.

For example, in 2018, cryptocurrencies, including Bitcoin, saw their prices drop after the end of the Chinese New Year, due to increased regulatory scrutiny from the Chinese government. In 2019, however, the prices of cryptocurrencies, including Bitcoin, rallied after the end of the Chinese New Year as investors saw an opportunity to invest in cryptocurrencies during a period of market volatility. .

It is important to note that the crypto market is highly volatile and can be influenced by a variety of factors, including regulatory developments, economic conditions, and investor sentiment. As a result, it is difficult to predict how the crypto market will react after the Chinese New Year ends.

While the decline in Chinese equities and the crypto market may seem concerning, it could also be seen as a necessary pause after months of gains and a sign of profit taking by investors. Nonetheless, the market will continue to watch closely for the impact of negative factors such as the Biden administration’s tech war and Covid infections.