Author: 636Marx

My friends in the cryptocurrency circle like to share the ploymarket U.S. presidential prediction chart. Ploymarket is the world's largest decentralized prediction platform, allowing bets on various political, news, cultural, and technological events. Of course, ploymarket is also the largest among centralized platforms globally.

The rednecks shout "America great, Trump king!" However, the Democrats are still leading in mail-in ballots. Just look at Harris's prediction curve, which rises like a king cobra, and you'll know this matter is not simple. November 5 (Beijing time November 6 at 09:00) is the deadline for voting in the 2024 U.S. presidential election, which will determine whether it will be the Republican Trump or the Democrat Harris. I reviewed the political and economic propositions of the Democratic and Republican parties over the past half-century, describing how the declining America will bring new changes to the global cryptocurrency market and Chinese cryptocurrency investors.

This article will explore multiple dimensions, including a historical review of the Chinese cryptocurrency market, the independence and interconnectivity of global crypto finance, and the potential impact of Trump and Harris's policies on the Chinese market, to help Chinese cryptocurrency investors cope with possible market changes.

1. Historical Review of the Chinese Cryptocurrency Market: Can Hong Kong's Experience Indicate Further Relaxation of Regulations in the Chinese Cryptocurrency Market?

China's attitude towards cryptocurrencies has undergone several 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 currency status. By 2017, the seven ministries' 94 prohibitions were introduced, 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. (For a detailed description of this history, please refer to my previous article "Trends in the Chinese Cryptocurrency Market Worth Watching in the Second Half of 2024.")

Hong Kong has played a "testing ground" role in the development of the cryptocurrency market. In mainland China, converting USDT to cash is considered illegal financial activity and is not protected by law. I once had three bank cards frozen due to transfer associations, along with two family bank cards, and over 30,000 yuan was frozen by the Humen Police Station in Dongguan. It was only after obtaining various proof materials through Dongguan's petition office that I managed to unfreeze the funds. Currently, OTC can apply for Hong Kong bank accounts to buy and sell USDT in specific foreign currency zones, and then exchange it to overseas payment accounts, allowing for legal use in mainland China. The following image is from a money laundering case involving cryptocurrency OTC in Hengyang, Hunan, found through lawyer Pan in my social circle. It was described that due to the pandemic, the parties involved were not allowed to meet after being detained, making the case difficult to advance.

The Hong Kong government is actively promoting a compliant virtual asset trading licensing system, and currently, over 90 cryptocurrency companies have settled in Hong Kong. Not only can cryptocurrency funds be established, but it also has China's only legal digital currency exchange, HashKey Exchange, which provides fiat currency deposits and withdrawals. HashKey Group's chairman, Xiao Feng, was formerly the deputy director of the Securities Management Department of the People's Bank of China Shenzhen Special Economic Zone Branch. Hong Kong has now become the most important center for cryptocurrency innovation in China and even Asia. Justin Sun posted on social media in August this year that China lifted the digital ban, and influencers usually have a nose more sensitive than dogs.

If Trump comes to power, his vice president, J.D. Vance, is a staunch supporter of cryptocurrencies. Trump's own family has also launched a cryptocurrency project, World Liberty Financial (WLFI). Trump publicly stated, "All bitcoins should be minted in the U.S.," and "Biden's hatred of 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 China's central bank digital currency (DCEP), and his pro-crypto policies 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 policies, leading to 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 the nature of the opponent it faces.

2. Independence of the Chinese Cryptocurrency Market: Is There a Disconnection from Global Crypto 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 to the global crypto financial system.

The Chinese cryptocurrency market is also independent of global crypto finance. During the FOMC meeting in September, Bitcoin's correlation 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 yuan into the market. The Shanghai Composite Index and Hong Kong's Hang Seng Index rose by 4.5% and 3.2%, respectively. However, the BTC and ETH, which Chinese investors are most concerned about, did not respond in correlation.

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 the People's Bank of China's reserve requirement ratio cut and interest rate reduction compared to the Federal Reserve, indicating a disconnection between the Chinese cryptocurrency market and global crypto finance.

The global Bitcoin market has a total market capitalization of 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 primarily depends on incremental funds and investors' expectations of favorable market conditions.

After Bitcoin broke through $70,000, ETF funds continued to flow in, but Bitcoin did not rise. It is believed that Bitcoin is already at a high level or is waiting for the U.S. election results before participating, thus absorbing the incremental funds flowing into the Bitcoin market. Compared to Western cryptocurrency ETFs, Hong Kong has taken some actions but remains cautious. Unfortunately, organizing this data will be quite complex. I believe that the bearish expectations in the Chinese cryptocurrency market have absorbed the incremental funds flowing into Bitcoin.

The direction of the U.S. open cryptocurrency policy, especially regarding the relaxation of capital gains taxes and other economic policies, has an amplifying effect on the volatility of global crypto finance. China, on the other hand, adopts a cautious mainstream attitude towards global crypto finance, and its policies are relatively more enduring than those of the U.S. The global landscape of crypto finance will not be severed by these two major powers, and crypto investment will evolve into a higher-level cognitive behavior.

3. Risk Analysis: Predictions for BTC Trends After the Election and Long-term Investment Suggestions

Based on historical trends, the implementation of policies and adjustments in market expectations after the election will impact BTC prices. Currently, the U.S. government's public debt stands at $28.1 trillion, approximately 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%. This indicates that regardless of who is in power, the U.S. government will continue to expand its debt, which is an opportunity for BTC to re-enter the market.

Short-term Positive Expectations if Trump Wins

If Trump wins, the market generally expects him to promote a more relaxed policy environment. In this context, BTC prices may experience a wave of short-term increases, but this rise will not last long. Historically, Trump has been unable to quickly implement specific policies.

Long-term Stability if Harris Wins

If Harris wins, 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 prioritizes dollar stability and market stability. BTC may enter a long-term low period, suitable for finding low prices to build positions gradually.

Finally, if you are optimistic about BTC, regardless of the election results, investing in BTC and other mainstream coins can still reduce the impact of price fluctuations through dollar-cost averaging. As long as the global economic environment remains unstable, holding quality crypto assets is still an effective means of value appreciation.