After the break-up of Aphrodite's Child, Vangelis wanted to relocate to London. Producer Giorgio Gomelsky introduced him to some other musicians and put together a collaborative project which was funded by French free jazz record label BYG records with the intention of releasing an album. Some years later, Charly Records took over the catalogue of the bankrupt BYG records and released the recordings as an album in 1978 without the approval of the performers. The sleeve was made by Terry Oakes. In Germany Hypothesis and The Dragon were issued together as a double album titled Portrait. Vangelis subsequently took the label to court to have both The Dragon and related album Hypothesis taken off the market. In 2009, two tracks from the album were re-released on archive record label Finders Keepers along with another rare Gomelsky-produced Vangelis project known as 'Alpha Beta', on a limited edition Vinyl EP.
Apart from Vangelis, the line-up consisted of long-term musical collaborator Arghiris (guitar), and session musicians Michel Ripoche (violin), Brian Odger (bass), Micky Waller (drums). The sessions were recorded in London's Marquee Studios by Giorgio Gomelsky. According to Gomelsky, 'The idea was to find "grooves" that could lead into long, (sufi)trance-like but evolving rhythmic patterns with a lot of improvisation on top'.
Steven McDonald at Allmusic notes that although the album was mainly released to cash in on Vangelis' popularity, it contains elements of both Aphrodite's Child and Vangelis' upcoming solo work.Piero Scaruffi gave the album six and a half out of ten, saying "the intent of representing the ceremonies of the Chinese New Year celebrations is achieved through harmony and chaotic carnival, which builds an atmosphere of mystery and fear." Other reviews have been mixed, but the album has consistently enjoyed good reviews at Prog Archives.