Topic: Analysis of China's change of policy and the effect on Bitcoin prices - page 2. (Read 3219 times)

The problem isn't about only what the chineses are going to do with their bitcoins if the chinese exchanges end up closed on the 31th of January, but also what will speculators do if we receive news that the close is really unavoidable. Taking in account past reactions, most will sell.

I like the analysis.  I think it is only a matter of time before Taiwan wants to stick it to China after China's moves the last few weeks. :-)

Surprised Japan doesn't too after the sparing over the islands etc.

I don't think Chinese gov is against Bitcoin. I think they're just being careful. Bitcoin was featured in Chinese TV before and that's not an accident. I think they're just trying to figure out how to best utilize Bitcoin for their purposes (gaining power over US).

Until they figure that out, they will control it heavily so it doesn't get out of control from their perspective.

Great analysis.  China is one of my bigger concerns for XBT in the long run also.  I have a feeling China will continue to put in measures to ban, block, discourage any investment in XBT, or any other currency, from Chinese citizens.  They are higher protective the Yuan in so many factors.  They view XBT as a way Chinese citizens can sell yuan, buy XBT, and change into another currency.

Now how many will hold versus sell?  It's anyone's guess of course.  As one poster mentioned, most of the holders are well educated individuals.  Most of them know that so far China has not banned owning per say XBT, just buying them.  But essentially thats banning them.  Think of black Friday in online poker for US ~5 years ago.  US didn't ban online poker per say, they just banned people from transferring money to and from the poker sites.  People of course still played poker, sites developed work arounds, but mainstream players dropped out and volume dropped drastically.  I think we'll see the same in China.  Some will hold, some will buy with work arounds, but the mainstream is out of play.

The exchanges in China, have instituted some workarounds like coupon codes or using the owners bank account to get funds into the exchanges. However, how long this will remain acceptable to the PBOC of China, remains to be seen.
It is not really clear as to what the PBOC in China wants. Do they want to stop all funds transfer to exchanges or they just want to ban third party transfers (the chinese equivalent of paypal, dwolla etc...).

Can't help but assume more then 50%, possibly much more, will be holding onto their coins.  Considering the demographic and initial reasons for purchasing, as long as it is legal to hold onto their coins, they will do so, as they should also understand Chinas current stance is not shared by the rest of the world.

In the off chance that China does one day simply try to ban bitcoin ownership, citizens will still be able to hold them on a foreign exchange, or sell them there and recoup the funds.  The practicalities of an actual ban on bitcoins though would be complex and the whole situation would just be absurd.  It's extremely unlikely anyhow.

Further, if demand in China remains, which it likely will especially amongst the sample demographic, and assuming personal bitcoin trading is allowed, citizens will be holding a rare asset.

There are many reasons to hold onto their coins, and significant malleability in the worst case scenario, such that rational investors and rational speculators will have many incentives to hold, something many of them were going to do anyway.

In saying that, IF there is a concentrated sell-off on btcchina (if = assuming the coins that are going to be sold are not being sold sporadically and without bottleneck) then sure rates on other exchanges may follow for a short period.  Thea mount of fiat sitting on exchanges world-wide though, and the influx of new fiat expected this year, I think will more then make-up for the potential short-term supply infusion.

Thanks for the analysis. I would expect the kind of investors you are mentioning are travelling on a regular basis, or have plans to travel in upcoming years.

If they believe in Bitcoin itself, they will hold on to it for long term. This is the 41% you're mentioning. Regardless of Chinese gov., they will be able to exchange their coins abroad for US dollars or EUR if they need to.

DISCLOSURE: I'm a retired financial analyst and I have a lot of experience on doing qualitative analysis (I know this doesn’t mean anything when dealing with Bitcoins). I've been long on Bitcoin since February of this year and I am a true believer as to the massive economic and social impact that Bitcoin will have upon the world in the future. With that being said, I do believe in protecting my gains, especially when I believe the #1 exchange (BTC China) in terms of volume is probably going to be shut down after January 31, 2014.

VOLUME: From August 22nd through December 19th (120 days), 3.9 million Bitcoins, 15.1 billion Yuan (approximately $2.29 billion) were traded on BTC-China. For the same period, 3.2 million Bitcoins ($1.4 billion) were traded on Mt. Gox (U.S. currency only) and 2.7 million Bitcoins ($1.2 billion) were traded on BitStamp (U.S. currency only).  At a Stanford Seminar, Bobby C. Lee disclosed the result of a survey that BTC China conducted to their Chinese costumers only. While disclosing that it was not accurate (a few receive an iPad for participating), the results were very interesting. Over 90% of their customers who participated in the survey held at least a university degree compared to the national average of 27%. Next they asked why they are buying Bitcoin. Five percent to purchase goods, 19% for novelty, 34% for short-term speculation and 41% for long-term investment.  Assuming that the survey was a somewhat accurate representation of Chinese users, approximately 1.6 million (3.9 million X 41%) Bitcoins were purchased for long-term investment. This 1.6 million Bitcoins that were purchased and held for the long term is a very conservative estimate considering that: a) it doesn't even count the number of Bitcoins that were mined in China; b) it is only 13% of the total number of Bitcoins in circulation (12.1 million) allocated to the 2nd largest market of Bitcoins.

BTC China: On December 5th the government of China banned financial institutions from having direct dealings with Bitcoins. I thought that the global market over reacted to a positive directive (regulation = legitimacy). Bitcoin's price dropped 43.7% from $1,237 at the opening of the trading day to the closing price of $696 on December 7th.  Then it went up 48.35% to $1,034 by the close on December 10th. On December 16th, the Chinese government, using their agent, People's Bank of China (PBOC), convened a meeting with third party channels demanding the end to custodian and trading services. With this news the price of Bitcoin dropped by 41.2% from $920 at the opening of the trading day to the closing price of $541 on December 18th. Speaking for myself, I didn't realize the importance of the December 16th meeting until December 18th when BTC China announced through their website that, as of now, it would not be able to accept new deposits into the exchange. Equally important, you won't be able to get your money (Yuan) off the exchange AFTER January 31, 2014. While Bobby C. Lee, CEO of BTC China, is not giving up yet, I personally think that the exchange is finished. I made the mistake of not seeing the writing on the wall on December 16th, partially because I'm ignorant of Chinese culture and partially because I wanted to believe that such an important market for Bitcoin's past and future growth could not end. My research on the internet has led me to conclude that the Chinese government has thought about the implications of the use of Bitcoins to evade their capital controls and has ended the Bitcoin experiment in China .

Mt. Gox order book depth currently has 108,000 Bitcoins to purchase before it hits the $100 mark. BTC China’s order book depth is only 20,000 Bitcoins until it goes to zero. That’s not much considering the average daily volume was 58,000 on BTC China for November.  From December 18th to December 26th, 227k, 172k and 332k Bitcoins were traded on BTC China, Mt. Gox and BitStamp, respectively. Obviously not every trade was from Chinese investors trying to dispose of their positions, so the amount of Bitcoins that need to be divested is still quite large. So I’m going to guess that 100K Bitcoins have been divested by Chinese investors so far which leave at least 1.5 million Bitcoins outstanding.

SCENARIOS:  So far, I can only think of only 3 options that the Chinese have:  a) hold them for the long-term and eventually trade them in gray markets (investment if Bitcoins are not yet illegal in China);  b) sell them in foreign exchanges for a premium; or, c) wait and see (if the Chinese government is really against Bitcoin or if BTC China is able to get a third party vendor to reinstate deposits and withdraws). If I missed any other viable scenario, please post it. No one option is what they are all going to do in the upcoming month, but I want to get a felling for what the majority of Chinese Bitcoin investors are thinking.

We know that a considerate amount of Chinese Bitcoin investors are male, under 40, and very well educated.

I need insight if they believe in Bitcoins enough to keep them for the long-term and possibly go against the wishes of their government.  If most Chinese investors believe in the very profitable future of Bitcoins, then, I believe, the effect on the price of Bitcoin will not suffer too much by January 31st.

I’m of the opinion that not too many Bitcoins have been sold in foreign exchanges (yet), but I have to believe that a +20% gain if sold on Mt. Gox instead on BTC China (like the price difference was of December 19th) will attract some Chinese investors.  About 8% difference in price between the two exchanges during the last 3 days is not enough to warrant an exchange between countries. I want to get some insight if these Chinese investors would travel to Japan or Europe to get their earnings and how hard it would be for them to exchange the U.S. Dollar or Euro for Yuan.  I don’t know what alternatives Hong Kong would provide, so if you have an idea, please provide.

I’m nervous that Chinese Bitcoin investors have a wait and see approach. Any news, either coming from the Chinese government, BTC China or Huobi, I believe, will cause significant change to the price. I’m concerned that Huobi, the current lead exchange in the world in terms of volume, is defying the Chinese government. I want to know if my concerned is warranted and what the Chinese government will do about it. If the Chinese government raids the offices of Huobi, like India’s Enforcement Directoratendia has done with buysellbit.co.in, there would be a huge crash on Bitcoins price. On the other hand, Chinese Bitcoin investors have more than a month to divest their Bitcoins. I believe the international Bitcoin market could buy the 1 million Bitcoins (500,000 stay in China for the long-term) without hurting Bitcoin’s price due to the immense attention that Bitcoin has been getting the last 2 months.

QUESTION:  Obviously the number 1 question is what Chinese investors are going to do with their Bitcoins. I'm asking the Bitcoin community for their intelligent input. What I really want are replies from people who have experience of living in China, know their culture or better yet, know people in China who are or were invested in Bitcoins. If someone can translate the Chinese forums to see what they are thinking that would be great too.

I don't want your emotional charged opinions to sell or buy, what the price you think it will be in a month, accusations of being a bear, etc. For the most part, we are all long on Bitcoin and know that its meme is the honey badger for a reason. China will not be the end of Bitcoin, but possibly a huge bump on the road. Please don’t respond to brainless replies, it gets us off the point. The point is to listen so we can make an educated assessment of what Bitcoin’s price is going to do in January.