This article will review the history of the Chinese cryptocurrency market, the independence and interconnectivity of global cryptocurrency finance, and the potential impact of Trump and Harris's policies on the Chinese market from various dimensions, to help Chinese cryptocurrency investors respond to possible market changes.
Written by: 636Marx
Friends in the cryptocurrency circle around me like to share the ploymarket predictions for the U.S. president; ploymarket is the world's largest decentralized prediction platform where one can bet on various political, news, cultural, and technological events. Of course, ploymarket is also the largest among centralized platforms worldwide.
The rednecks shout, 'America is great, Trump is king!' In fact, the Democrats are still leading in mail-in ballots. Just look at Harris's prediction curve, which rises like a king cobra, and you know this is not simple. November 5 (November 6, 09:00 Beijing time) is the deadline for voting in the 2024 U.S. presidential election, which will determine whether Republican Trump or Democrat Harris will take office. I reviewed the political and economic propositions of the Democratic and Republican parties over the past half-century, describing how the fallen America will bring new changes to the global cryptocurrency market and Chinese cryptocurrency investors.
This article will review the history of the Chinese cryptocurrency market, the independence and interconnectivity of global cryptocurrency finance, and the potential impact of Trump and Harris's policies on the Chinese market from various dimensions, to help Chinese cryptocurrency investors respond to possible market changes.
1. A historical review of the Chinese cryptocurrency market: Can Hong Kong's experience indicate further relaxation of regulations in China's cryptocurrency market?
China's attitude towards cryptocurrencies has undergone multiple adjustments. As early as 2013, the People's Bank of China and five other ministries issued a notice (on preventing bitcoin risks), stating that bitcoin does not have legal status as currency. By 2017, the seven ministries issued a 94 prohibitions order, successively banning ICOs (Initial Coin Offerings) and the operation of virtual currency exchanges. However, with the rapid development of the global cryptocurrency market, there have been some subtle changes in China's policies in recent years, especially in the Hong Kong region. (Regarding this history, I have described in detail in my previous article (Trends in the Chinese Cryptocurrency Market Worth Noting in the Second Half of 2024).
Hong Kong plays a role as a 'testing ground' in the development of the cryptocurrency market. In mainland China, cashing out USDT is considered illegal financial activity and is not protected by law. I have had three bank cards blocked for transfers related to money transfers, along with two from family members, and over 30,000 was frozen by the Dongguan Humen police station. Finally, through Dongguan's letter of appeal, I had to provide multiple proof materials to successfully unfreeze it. Currently, OTC can apply for bank accounts in Hong Kong to buy and sell USDT in a specific foreign currency zone and then exchange it to overseas payment accounts, allowing normal transfers to be used legally in China. The following image is a money laundering case related to cryptocurrency OTC in Hengyang, Hunan that I found through Lawyer Pan in my friend circle. It is described that due to the pandemic, the parties involved were not allowed to meet after being detained, making the case difficult to push forward.
The Hong Kong government is actively promoting a compliant virtual asset trading licensing system, and currently, more than 90 cryptocurrency companies have established themselves in Hong Kong. Not only can cryptocurrency funds be set up, but it also has China's only legal digital currency exchange, HashKey Exchange, which provides fiat currency deposits and withdrawals. HashKey Group Chairman Xiao Feng was formerly the Deputy Director of the Securities Management Department of the Shenzhen Branch of the People's Bank of China. Hong Kong has now become the most important cryptocurrency innovation center in China and even Asia. Justin Sun mentioned on social media in August this year that China canceled its digital ban, and influential voices are often more sensitive than dogs.
If Trump takes office, his Vice President J.D. Vance is a staunch supporter of cryptocurrencies, and Trump's own family has also launched a cryptocurrency project called World Liberty Financial (WLFI). Trump openly stated, 'All bitcoins should be minted in the U.S.', and 'Biden's hatred for Bitcoin will only help China, Russia, and radical communist leftists. We want all remaining bitcoins to be 'Made in America'!! This will help us become an energy superpower!!'
Trump believes Bitcoin is the last line of defense against the Chinese central bank's digital currency (DCEP), and his pro-crypto policy may prompt China to accelerate exploration in this field. If Harris comes to power, her emphasis on stability and risk control will affect the Chinese government's assessment of Hong Kong's cryptocurrency policy, leading it to maintain a more cautious stance in the cryptocurrency market. Therefore, whether mainland China will accelerate the relaxation of regulations on the cryptocurrency market may depend on what kind of opponent it faces.
2. The independence of the Chinese cryptocurrency market: Is there a disconnection with the interconnectivity of global cryptocurrency finance?
China has implemented strict regulations on cryptocurrencies, but the demand for cryptocurrency investment in the Chinese market remains enormous. Investors participate in the global market through overseas platforms or decentralized finance (DeFi), which keeps the Chinese cryptocurrency market closely linked with the global cryptocurrency financial system.
The Chinese cryptocurrency market operates independently of global cryptocurrency finance. In September, during the FOMC meeting, the correlation of Bitcoin's movements with U.S. stocks exceeded 70%. Around the same time, the People's Bank of China announced a reserve requirement ratio cut and interest rate reduction, releasing trillions of RMB to the market, causing the A-share Shanghai Composite and Hong Kong's Hang Seng Index to rise by 4.5% and 3.2%, respectively. However, BTC and ETH, which Chinese investors are most concerned about, did not show a correlated response.
Due to China's regulations, emerging cryptocurrencies such as BNB, SoL, DOGE, etc., have different penetration rates in the Chinese market compared to BTC and ETH. Bitcoin shows far lower correlation with China's central bank's reserve requirement and interest rate cuts compared to the Federal Reserve, indicating a disconnection between the Chinese cryptocurrency market and global cryptocurrency finance.
The global market capitalization of Bitcoin is about $2 trillion, accounting for 3% of the total market capitalization of global stock markets. I believe that unlike mature stock markets, the cryptocurrency market's response to interest rate cuts mainly depends on incremental funds and investors' expectations of favorable market conditions while deploying their remaining funds.
After Bitcoin broke through $70,000, ETF funds continued to double inflow, but Bitcoin did not rise. It is believed that Bitcoin is already at a high level or is waiting for the results of the U.S. election before participating, thereby absorbing the incremental funds flowing into the Bitcoin market. Compared to Western cryptocurrency ETFs, Hong Kong has taken some action but remains cautious. Unfortunately, organizing this data will be quite complicated. I believe that the bearish expectations in China's cryptocurrency market have absorbed the incremental funds flowing into Bitcoin.
The direction of the U.S. open cryptocurrency policy, especially in terms of easing capital gains taxes and other economic policies, amplifies volatility in global cryptocurrency finance. China, on the other hand, adopts a cautious mainstream attitude towards global cryptocurrency finance, and China's policies are relatively more stable than those of the U.S. The global cryptocurrency financial landscape will not be divided by these two major powers; cryptocurrency investment will evolve into a higher-level cognitive behavior.
3. Risk Analysis: Prediction of BTC trends after the election and long-term investment suggestions.
According to historical trends, the implementation of policies after the election and the adjustment of market expectations will impact BTC prices. Currently, the U.S. government’s public debt stands at $28.1 trillion, about 99% of GDP. The Congressional Budget Office predicts that if Trump is elected, debt will rise to 166% of GDP by 2034; if Harris is elected, it will grow to 109%. Thus, regardless of who governs, the U.S. government will continue to expand the scale of debt, which is an opportunity for BTC to re-enter the market.
Short-term positive expectations of Trump's victory
If Trump wins, the market generally expects him to promote a more relaxed policy environment. Against this backdrop, BTC prices will experience a wave of short-term increases, but this rise will not last long. Historically, Trump has not been able to quickly implement specific policies.
Long-term stability after Harris's victory.
After Harris's victory, her regulation of cryptocurrencies may become stricter, which could suppress the price growth of BTC and others. In the short term, the cryptocurrency market may face pressure, as Harris requires dollar preservation and market stability. BTC may enter a long-term low period, suitable for finding lower prices to accumulate positions in batches.
Finally, if you are optimistic about BTC, regardless of the election outcome, investing in BTC and other mainstream currencies can still mitigate the impact of price volatility through regular investment. As long as the global economic environment remains unstable, holding quality cryptocurrency assets will still be an effective means of value appreciation.
