This is just speculation, I have no basis for making this prediction other than thinking about the situation.
But I think, for everyone asking what is going on in china, what we may see before the end of the month is some kind of law requiring bitcoin traders to register bitcoin addresses with the chinese government. You will not be able to withdraw from an exchange except to addresses that the government knows belongs to you. And when you spend from these addresses, there will (often) be a tax hit or some kind of tariff. Unless you are spending to yourself, but in that case you will have to register each new address, possibly up to some limit. Maybe there will even be a fee for registering each btc address. Chinese will be instructed to use wallets that send change back to originating address, so there won’t be a thousand addresses in a single chinese person’s wallet muddling tracking.
This would allow bitcoin for speculation, but it would prevent divesting money overseas, at least not without paying some excise tax or the government knowing about it.
Chinese businesses that transact in bitcoin would then be visible not only to the chinese government but also (likely) to their competition and the general public. This would discourage local adoption without seeming too heavy handed, and allow bitcoin investment as pure forex. Forget about privacy, but you can still make money as a trader if you pay the tariff, or whatever they come up with.
Essentially, I’m predicting coin validation but with a chinese twist which is probably even more intrusive than many privacy advocates fear in the west.
I think if my prediction comes true it’s mildly bullish in the short term, but it also gives coinvalidation/registration a lot more teeth (including in the US and Europe) if a giant part of the bitcoin market is going with it.
Medium term might be bearish, especially if the only reason for buying btc is to convert yuan to usd without the government knowing. This would pretty much put a stop to that; only long term investors would be in the game, and tax shenanigans would not be feasible.
I think china is likely to allow localbitcoin as a sort of gray market thing. They might occasionally bust someone to make an example, but they’ll tolerate it by and large, as long as it doesn’t get too big. So you could still get unregistered bitcoin that way if you don’t mind going back alley.
By the way, I think this pattern is likely to repeat in other countries with capital controls and high inflation, such as Argentina, syria, etc. It is just free enough to pacify the population, while leaving the government largely in control.
If it takes hold there, it might some day take hold in the USA and Europe, especially if bitcoin grows to the point that it challenges fiat currency.
We will be living in interesting times.