Topic: Analysis of China's change of policy and the effect on Bitcoin prices (Read 3248 times)

Thank you for this, it is great insight into a confusing situation. 

huobi users can zoom their own funds, they can borrow by 100 yuan to 200 yuan (or 1B financing 2B), financing interest is 0.2% / day as collateral, the interest income is the main income huobi, buying and selling is free . These users are keen to buy and sell bitcoins, aims to make the difference. This is such a huge trading volume huobi real reason.

I come from China. Let me answer your question:
1, this one is answering on behalf of the Central Bank of China, Japan's central bank on a reporter's question about China's attitude than bits, so it is understandable that he represents the Chinese government.
2 Prior to this, all messages are Chinese central bank to combat discrimination bit more than we understand the Chinese mainland government to supervise than trying to strike a bit more than a bit, it is very negative.
3, the news today, government officials said the government will not blow himself and discrimination bit more than this is positive news.
4, there is no text version 'does not blow and discrimination than bits', but the video has to say these words, time is 1:23:40 starts.

Great point.  That's really interesting, that those currently using Huobi "are not bitcoin holders".  I have read about the leverage they offer, essentially the offer short term loans if I am not mistaken.  Perhaps this is why there is so much volume; people put in Y1000 and leverage it 100:1 (or whatever) therefore they can buy Y100,000 worth of BTC, and play the market. 

Are you in China?  Would be interesting to hear your take on the situation

Thanks for that.  I am assuming you speak Chinese since you are able to pinpoint the bitcoin reference in the video?  Are you able to translate that part of the text?  A quick read of the Google Translated version says very little about China's stance on BTC, and I can't see anything that says they will not "fight or discriminate against" bitcoin.  In fact it looks like a classic dodging of a question by an official who doesn't really know what to say, with him just explaining what he thinks bitcoin is.  

We also have to consider who the speaker is; according to Bloomberg, http://www.bloomberg.com/news/2010-11-30/china-needs-clear-policy-shift-pboc-s-sheng-says-correct-.html Sheng Songcheng "was formerly the head of the central bank’s Shenyang branch before an appointment as head of the central bank headquarters’ statistics and analysis department, according to a bank official, who declined to be named due to agency rules."

It doesn't sound like this guy is a real decision maker in the world of Chinese politics.

About huobi, I would say, a lot of money into the huobi, most of these funds is speculation funds, they are not bitcoin holders. Because buying and selling in huobi no cost and no ups and downs stop limit, is better than in Shanghai and Shenzhen A-share market. In addition, huobi can provide three times leverage, it attracts these speculative funds, high-interest lending function huobi there is a policy risk in China.

Latest news: China's central bank said（Begin recording 1:23:40）, do not fight, do not discriminate against Bitcoin（
Video Link：
http://www.china.com.cn/zhibo/2014-01/15/content_31172976.htm
Text Links：
http://www.china.com.cn/zhibo/2014-01/15/content_31172976.htm?show=t

Fantastic analysis of the current situation with China.  I am surprised this thread has not gathered more momentum.  In answer to your question about TaoBao, and in hopes of getting this discussion going again, I would imagine TaoBao/Alibaba sees the same writing on the wall as many of us do.  I think the more important question you raised above is

"If you believe that the Chinese government is underhandedly trying to ban Bitcoin and all other virtual currencies you have to ask the question why are they not going after Huobi?"

The answer, I think, is why would they?  Effective December 5th financial institutions are forbidden from dealing with bitcoin (and potentially with exchanges, depending on how you read the announcement).  They have given 3rd party payment providers until the 31st of January to comply with their new rules.  At this point Huobi hasn't really broken any rules, aside from using the CEO's personal bank account which from what I understand is at the least not acceptable and perhaps even illegal (maybe this is why they have switched to corporate account only).  Perhaps the government is playing cool, not going to get into a panic about what this one exchange is doing.  I think they are taking very deliberate actions to pour water over the bitcoin fire in China without looking like they are panicking and struggling to retake control.  I guess we all have to wait and see. 

I also agree fully with your analysis of what could have been the cause of the TaoBao/Alibaba decision to stop sale of bitcoin related items on its site(s).  Alibaba is also working on their IPO, and it would make sense for them to put forth some friendly offerings to the government.  And for anyone who has not read it, this opinion is mirrored in a thread here https://bitcointalksearch.org/topic/m.4407494 by user zhangweiwu.

Regarding your questions posted on the 8th:


Have a look at this survey from Sina.com http://survey.finance.sina.com.cn/result/86550.html.  Users of one of China's largest "infotainment websites" were asked (via Google Translate): "Do you still want to buy bitcoins" (你还想买比特币吗).  Of the 3600+ respondents, 67.1%, answered "Don't Want To" (不想).  I'm not pretending to know what bitcoin investors in China are thinking, but if my government told me I had X days left to withdraw money from a certain investment, I would get my money out asap.

I think that there are a few very important questions that are not really being raised or addressed on any of these forums:

1.) If Huobi has found a workaround for getting funds in/out of their exchange, why hasn't BTC China?  They were the largest exchange in the world for a time, why would they just lay down and not fight?  Wouldn't you think the investors who recently put $5 million into BTC China would be saying "hey, why don't you do what Huobi is doing"?  Of course they did.  The reason they aren't going this route is because they know what is about to go down.  If you watch any of the interviews with Bobby Lee recently you can tell that he knows his time is up.  Also, the fact that Bobby Lee was confirmed as the source for the December 16th news about 3rd party payment providers I think is important.  Many people on this forum and on reddit are under the impression that Bobby Lee does not have enough "Guanxi" or relationships with the Chinese government, which is why Huobi has been able to pick up the volume that BTC China has dropped (and some).  The fact that it was Bobby Lee who "leaked" that news shows that he at least has enough relationships to be the first to know about this back room meeting, and the fact that he is not using the same methods as Huobi to maintain his business says that he knows the writing is on the wall. 

2.) I believe the most important question is how can Huobi, a previously unknown exchange, have built such a massive amount of volume in such a short time?  As of today they have a whopping 74.31% of the global BTC market going through their exchange http://bitcoinity.org/markets/list?currency=ALL&span=24h.  It doesn't make sense.  However, if someone wanted to make a mad dash just before the pending January 31st deadline, this would be the way to do it - create artificial volume to give the illusion of a bullish scenario, meanwhile pump the price up creating a very effective buying wall to sell into just before the new regulations took effect.  I have no evidence that this is what they are doing, I am merely saying if someone wanted to do it, this is they way it would be done. 

3.) (and perhaps @contactluis, with your background in the financial industry you are the best to answer this)  If Huobi were to shut down tomorrow, what would the effect on price be?  Or asked another way; what would the effect on the price of bitcoin in 74% of volume were to simply cease overnight?

Very well though out analysis @contactluis.  And I'd love to hear your thoughts on the 3 points above

I think these are great questions, but the true question is how active is the Chinese forum to people who are actually in China and own Bitcoin vs. people who just speak Chinese?  I would be very wary of posting anything if I lived in China on a Bitcoin forum.  You know the government is trying to crack down on virtual currency.  You know that most likely have the ability to track website usage and IP address.  Why take any chances?

Surely the opposite is true? If you are Chinese and have managed to obtain bitcoins, the fact that they will be much more difficult to acquire in the future for your countrymen is surely a reason to hold on to them?

 

The Chinese government could keep tabs on people using LocalBitcoins and could crack down on them later. My guess is that the Chinese are generally wary of doing anything on the Internet that could cause them trouble, particularly anything not Chinese.

Imagine, for example, that a Chinese citizen regularly calls up the online banking pages of a foreign bank. Even if the communication is encrypted and cannot be cracked, which is by no means certain, the mere fact of regular communications with certain URLs would already be a problem. The same holds for LocalBitcoins.

I grew up in a communist country (East Germany), and I still have that way of thinking ingrained. (In fact, the modern truth seems to be even worse than the Stasi in East Germany, so we should all get used to that way of thinking.)

Mattius459 - that would be great if you could do that. Thanks

Questions:
1) What are you (the Chinese Bitcoin investor) thinking about doing with your Bitcoins before the Chinese new year?
2) Do you think that the Chinese government will ban Bitcoins or just make it very difficult to invest in them?
3) Is there any regulation that prohibits Chinese citizens from trading Bitcoins in foreign exchanges?

hgmichna - very good issue that you brought up. I'm assuming that it is illegal for Chinese citizens to trade in foreign exchanges but I don't understand why localbitcoins.com would be a problem.

There is another aspect that has not been mentioned yet.

China has an enormous apparatus with hundreds or even thousands of government employees to control the Internet activities of its people.

This means that it is risky for Chinese bitcoin owners to use foreign exchanges and banks, because they must fear being tracked and being punished. Even using localbitcoins.com is a problem.

In short, trading bitcoins may be more difficult for the Chinese than one first thinks. This means that there is an additional tendency to divest oneself of bitcoins to avoid these problems.

I have a BA in Chinese, but that isn't saying much, especially when dealing with technical topics such as Bitcoin. Unless you have a real Chinese person who has volunteered to do your bidding then I would be happy try to translate and then paste into the Chinese forum tomorrow. Your questions are my questions and it sucks having the language barrier.

What do you think about the news today that the ‘Ebay of China’, TaoBao, announced that it would no longer allow sales of virtual currencies (Bitcoin, Litecoin, etc) and anything related to Bitcoin (rigs, manuals, etc)  starting next Tuesday?  For people who don't know, there are two ways to deposit Yuan into BTC China, cash deposit and BTCC Voucher. You buy a BTCC Voucher through a number of vendors, but all of them only have stores at TaoBao.com.  So after next week, the only way to deposit any Yuan into BTC China is though cash. Unless BTC China comes up with a new way to deposit Yuan, I don’t see how the exchange will be operational after January 31st.   This leads me to my next question.  Is the Chinese government after BTC China only or are they after all digital currencies or is the ban an overreaction by TaoBao over the new Chinese policy?   

If the Chinese government is trying to drive BTC China out of business, that would require an assumption that the government had direct contact with TaoBao to let it know of their displeasure of having digital currencies (vouchers) being sold at TaoBao.com.  This makes sense because the TaoBao ban basically closes BTC China but leaves Huobi (the leading exchange in China and the world) untouched. I don’t like this conspiracy theory because it is too complex and too publicly visible to pull off.   If you believe that the Chinese government is underhandedly trying to ban Bitcoin and all other virtual currencies you have to ask the question why are they not going after Huobi?  So the next option is the easiest for me to believe in. Lawyers and/or compliance department of TaoBao decided not to risk displeasuring their government for the very small revenue that Bitcoin related auctions bring in, so they decided to ban it.  If this is so, will Chinese investors realize this or believe that this is another step towards the banning (or making it very difficult to acquire or sell) of Bitcoins altogether? 

Well an official outright ban in China takes away mainstream Chinese citizens investors.  And there is potential a lot of those.

A 'ban' in China is really just a test of the bitcoin users & network resolve. Operating despite Govt intervention is one of the major selling points of bitcoin. So, a ban should just see short term specualtors leave the arena. The road was always going to be bumpy in the short term.

I have also been amazed at resiliency of BTC price in light of the China news.  I would have thought a drop to around the lower base level and stay there for a while.  Good explanation offered by OP though.  Not sure of a catalyst to go much higher though.

I do see at some point Huobi shutting down or being so restricted in money flow (ie, cutting operations to fund accounts) that they are essentially shutdown.  I think that will drop the XBT price.  But I also think there is enough support worldwide that essentially it will be another buying opportunity.  I don't think it'll $100.  Way too much support well above that.

Great post

I have been confounded as to the resilience of Bitcoin price in light of the China news. I think Huobi explains it all, the volume on Huobi is enormous.

One of two scenarios will play out:

1) Huobi will for some mysterious reason be allowed to continue operations as they currently are. If so, Bitcoin prices will likley continue to rise in face of a lot of this negative news from China.
2) As you suggest this Huobi volume in China is a bold defiance and we are watching this game unfold before our eyes. Don't the Chinese execute people for complete disregard for Government policy?

I am long on Bitcoin but these swirling events and the sky high valuation are driving me nuts. After reading your post, i think a Huobi shutdown is inevitable. If so, say hello to Bitcoin at $100 or lower IMHO.