The Spring Festival Effect Returns! Retail investors in the crypto circle cash out and exit—should you follow the trend or buy the dip in this round of market?

Hello everyone, I am Crypto Commander. Less than a month before the Year of the Snake in 2025, the familiar "pre-holiday cash-out wave" in the crypto circle is unfolding as expected—Bitcoin has fallen from its high of $102,000 to the $92,000 range, a decline of over 10%, with retail investor net outflows expanding for two consecutive weeks. This scene feels familiar, yet hidden beneath it are new changes. Today, I will discuss the underlying logic of the Spring Festival market from three dimensions: historical patterns, market logic, and trading strategies.

First, look at historical data: over the past 10 years, Bitcoin has experienced significant declines before the Spring Festival in 8 years, with 2020 and 2023 as exceptions. In 2024, 30 days before the Spring Festival, even with the support of Bitcoin ETF approvals, the price dropped from $49,000 to $38,500, a 21.59% decline; 2017 was even more dramatic, with three drops exceeding 10% within just 10 days before the festival, marking the most intense short-term volatility of the year; even in the relatively stable 2019, there was a 9% single-day drop before the holiday. This high-probability "Spring Festival effect" is primarily driven by seasonal capital flows in East Asian markets—China, Japan, and South Korea, as major crypto trading nations, see increased demand for New Year shopping, red envelope reserves, and year-end bonuses, prompting retail investors to cash out and creating concentrated selling pressure.

However, this year's market has a key difference: the dominant power has already shifted. In earlier years, the crypto market was a "sentiment-driven market" led by retail investors, where pre-holiday cash-outs could directly trigger chain reactions of decline. Now, Wall Street institutions, through tools like ETFs, have become the main force, greatly weakening the impact of retail trading on overall trends. Recent data shows that miner sell-offs have only slightly increased, mainly routine year-end bonus distributions, with no signs of panic-driven mass exits; OTC trading on the three major exchanges remains stable, with liquidity maintained. This indicates that pure retail cash-outs are unlikely to cause the large waves seen in previous years; macro policies and institutional movements are the core variables determining market direction.

Next, look at post-holiday patterns: in stark contrast to the decline before the festival, Bitcoin has a 83% chance of rising after the Spring Festival, with an average increase of over 21% in the past five years. After the 2024 holiday, the price rebounded from $38,500 to $51,700, an 8% increase in 10 days; in 2021, it even surged by 20%, kicking off a full-year bull market. This "correction before the festival, rebound after" pattern is essentially a combination of seasonal capital flows and long-term market trends—short-term supply-demand imbalances caused by retail exits before the festival often become opportunities for institutions to accumulate at low prices, and as liquidity recovers and funds flow back after the holiday, the market tends to return to its fundamentals.

So, how should one operate now? Crypto Commander offers three core suggestions:

First, retail investors should not blindly follow the trend to cash out. If your holdings are not needed urgently for the holiday, there's no need to cut losses during the correction. Historical data has proven that panic selling before the festival often causes missed opportunities for rebound afterward. For investors with diversified holdings and substantial profits, consider reducing some positions to lock in gains, but it’s advisable to retain core holdings to avoid missing the long-term trend.

Second, beware of liquidity contraction risks. During the Spring Festival holiday, OTC services and trading desks may temporarily shut down, and market trading volume usually drops by over 12%. In a low-liquidity environment, price volatility may intensify. It is recommended to reduce high-frequency trading before the festival and avoid forced liquidation during sharp fluctuations. Focus on mainstream cryptocurrencies and stay away from small-cap altcoins.

Third, pay attention to post-holiday opportunities. If the pre-holiday correction exceeds 15%, consider gradually building positions in quality assets, especially mainstream coins like Bitcoin backed by institutional funds. The Federal Reserve has already started a liquidity easing cycle, creating a favorable macro environment for risk assets. After the holiday, liquidity returning and policy easing are likely to boost the market.

Finally, a reminder: there are no absolute rules in the crypto world. In 2023, the rebound after the FTX crash broke the usual pattern of declines before the Spring Festival. The holiday effect is only a short-term influence; ultimately, profits depend on cognition and mindset—following the trend and chasing highs and lows always leads to retail losses. Respect the market, understand the rules, and approach rationally to stand firm amid volatility.

The Spring Festival is a moment to bid farewell to the old and welcome the new, as well as a window for market re-pricing. Instead of obsessing over short-term ups and downs, it’s better to calmly analyze your holdings and view the value of crypto assets from a long-term perspective. Wishing everyone a happy New Year and a long-lasting bullish trend!