It could be both. At one point a pest had moved into a settlement that caused them to decide to burn it all down and start over. They then decided to periodical

It could be both. At one point a pest had moved into a settlement that caused them to decide to burn it all down and start over. They then decided to periodically do this in order to prevent the pest from ever being able to come back. Over the years the need for this had gone away but the practice remained and took on a ritualistic meaning more so than a practical one. And as these things go, the original meaning was lost. To me, this seems like the intuitive explanation.