A prediction on China’s last regulatory strike on crypto industry
I. An effective Strike on Crypto mining
Recently, Chinese Authority has implemented heavy-handed regulatory actions on mining industry. The 51st conference of Financial Stability and Development Committee called for cracking down Bitcoin mining and related trading activities, and resolutely preventing individual risks from being spread to the social sphere. At present, local authorities have released detailed documents on mining crack down and these actions are carried out effectively.
The network hash rate saw a huge drop ofby3%, from former 179E to 84E(the average of the last 3 days). The total hashpower in China, which accounts for 60% of network hashpower, has been knocked off by 90%- only some small miners still run while large datacenters were completely shut down. Miners are expected to go abroad for the recovery of hashpower.
Given that chinese miners have been cracked down, both on policy and implementation, severe regulatory actions on exchanges will definitely come one day, though we have no idea when it will happen and what kind of regulatory documents will be issued.
II. In light of some recent events:
Huobi Global sent executives and large number of employees abroad.
Xu Mingxing removed OKCoin’s Registered Entity in mainland China from the Register and posted a picture of “sailing out to sea” in Wechat moments.
All these things considered, I guess the crackdown on the Chinese exchanges is to shut down its operational entities and workspace in mainland China.
Reasons are as follows:
It’s difficult for Chinese authority to enforce the law and to implement the regulatory actions on a completely foreign exchange like Binance whose founder is Canadian and employees as well as executives are working abroad.
Although Huobi and OKEX have changed its main body of equity to overseas since September 4th, 2017, they still have business places in China, which is against regulatory spirit and will be the only way to regulate.
III. Strike effect prediction on Exchanges
After this round of regulatory, parts of small exchanges that cannot work overseas will be forced to shut down;
Exchanges without enough employees overseas will be affected to some extent.
It is estimated that Huobi is more prepared than OK as you can find an article by searching keywords “Huobi and go abroad”on April 19th saying: According to reliable inside information, operational staff of Huobi went abroad together. But OK may have determined to transfer its employees abroad only after Xu Mingxing posted his Wechat picture.
Although the trading of exchange whose servers are located overseas will not be affected, it will be difficult for them to run normal business in China, thus achieving the purpose of cracking down on exchanges.
Since then, the cryptocurrency industry will be completely de-sinicization. Hiding and clearing itself- The best blockchain is the one that doesn’t exist. After all, who would have thought that Bitcoin mining maps which is created jointly by the Cambridge University and Chinese mining pools would become the weapon for the crackdown?
IV. Prediction on Bitcoin price:
For now, the disagreement : is this a correction in a bull run or a beginning of a bear market?
To answer this question, we must consider how did the historical bull runs of Bitcoin come from? On a macro level, it was generated through the value realization of Bitcoin, while on a micro level, there has been a huge amount of new investors and funds in every bull run.
Then, are there any new investors and funds in this bull run? Yes, and it has been an epic increase since large amounts of U.S institutional funds like Tesla, Grayscale, Microstrategy and 401k pensions entered the market, and even sovereign countries like EI Salvador has made Bitcoin legal tender.
The volume of funds of these large institutions is far more important than that of individual investors. Tesla bought $1.5 billion in Bitcoin, equivalent to the funds of several hundred thousand individual investors, while there are only a few million domestic investors.
So did the Bitcoin price show a corresponding multiplier increase? Not really. The increase(purple) for the fourth halving epoch from the halving point is less than a small fluctuation in the first three halves epoches, which didn’t match with the inflowing funds.
This is the biggest source of conviction for many seasoned investors in the cryptocurrency industry, who went through multiple bull and bear runs, believe that the real bull market has not started yet.
The other reason is that according to Google Trends statistics, every time when the bull market appears, there are more and more people searching for Bitcoin, and the increase is multiplied by times.
However, Google Trends statistics showed that the current search volume is even lower than the 3rd bull run in 2017. This suggests that a large number of small and individual investors have not yet entered the market or gone wild, and that $65,000 is just a local peak.
If there is an official document to close the legal entities and business space of exchanges in mailand China, the blow to the Bitcoin price is expected to be limited as the market has been psychologically prepared for the last crackdown actions for a long time, and there may even result in a November 15th, 2017 effect again.
November 15th effect: On September 4th, 2017, the Central People’s Bank and seven other ministries issued the “Announcement on Preventing Risks of Token Issuance and Financing”, and on September 15th, the regulatory has required domestic exchanges to issue announcements about shutting down the business space and refunding funds on the same day, a large number of “informed sources” opened a tremendous amount short selling orders and the major three exchanges all issued announcements in the same afternoon.
The exchanges are going to be closed, there will be no place to sell the coins, all your coins are going to become commemorative coins or game coins, aren’t you afraid? Is short selling a 100% win? Unexpectedly, the BTC price started to explode at 8 p.m. ton September 15th, liquidating a large number of informed sources’ rat trading positions. The Bitcoin price increased from $18,000 to $130,000 within three months.
V. What if the bear market has already started?
The Bitcoin price in the long term depends on the number of users , and in the short term depends on luck. Our confidence in the long-term bull run stems from the long-term indiscriminate issuance of fiat money.
But the short-term trend can only depend on luck. We can not exclude the possibility of a bear market in the future, but even if there is a bear market, it is a short bear market, that is, no more than a year. (e.g. 2014–2015, 2018–2019), but rather a short run in the middle of a double-headed bull run in 2013, or a monkey market after the June 2019 bull run.
Because there was no madness or greedy funds during the slow peak on April 14, 2021, and morale of investors were not heavily depleted, even if there was no reversal, it would not be difficult to make a reversal a few months later since legal tender took no actions and lots of institutions showed interest in Bitcoin.
After all, only few poeople can survive to greet the first light of day, wish you are together with me at that time.