But how does the monkey above impact your life? Well, if you have been reading the industry blogs, you might have noticed many investors reporting that CNY is having a negative impact on the market, with less transactions and less liquidity available from Chinese buyers. Why is that? Well, one of the explanations goes back to the Chinese traditions revolving around the new year. In the weeks prior to CNY, it is customary to pay all your outstanding debts, as it is considered a loss of face to start a new year in the red. Since a lot of Chinese domain investing has been financed by loans, this might explain why the high end of the domain transactions (LL and NN and NNN .com – the category of domains most likely to require loans because of their cost) have seen lower valuations, while the lower end (NNNN, LLL, etc) have not suffered any major decrease.

You might be wondering now – if this is true, would not we notice the same pattern in the pricing level in the past years? Let’s take a look at this chart with the prices in 2015:

Last year, the price of “chips“, one of the most traded and liquid category of domains, stayed stable in the $110 range until Woman’s day (8th of March), and then the price chart started to resemble a hockey stick by increasing almost 10% the week later ($119) and continuing his rally. Hold on a second though – if we look back at 2015, Chinese New Year fell on the 19th of February – so why did the price increase only 2 to 3 weeks later?

Well, there is another tradition that might explain this pattern. Chinese believe that the way you spend the first two weeks of the year, influences the way you are going to spend the rest of the year. This is why, if you are loaning money and buying up lots of domains, you might just end up doing the same for the whole year. Supertitions aside, can this really affect the aftermarket so much? The domain industry is still relatively small – the excellent DomainNameWire published an escrow.com report showing that the totality of domain transactions, while it is exponentially growing, did not pass 500 millions USD in 2015. After checking similar reports from DN.com (courtesy of Doron Vermaat), it seems like an educated guess to say that the domain aftermarket does not exceed 1 billion USD in yearly transactions. Any “small” asset management firm or hedge fund who decides to enter the secondary market of domains with a decent 100M investment would have the power to affect (read: manipulate) the trading prices of the liquid categories of the market.

If we analyze larger markets though, like the Shanghai Composite index, we notice that there was also in 2015 a dip and then a spike right around Chinese New Year:

So the question is – can Chinese New year be a statistically relevant event that you can leverage with your domain trading? For example, would the period prior to CNY be a good time to actually buy larger domains since the liquidity available on the market is lower? Maybe – the Chinese investment in domain names has only surged in the past 2 years and, for now, we do not have enough data to draw conclusions. The evidence in other markets though, suggests that there are parallels in the way very different traditions influence the stock prices – for example, a statistical correlation has been found between the Jewish holidays of Rosh Hashanah and Yom Kippur and the S&P 500 index.

For now, let’s wait until the 1st of March to draw any conclusions, and let’s enjoy the holidays before getting ready for an exciting Year of the Monkey. We will be right here 🙂

LIQUID MARKET TRENDS

Once again, the liquid domain trends are in collaboration with LLLLSales.com, which provides comprehensive data about the current market ranges for four letter .com domains together with links to the current auctions. Make sure to check it out!