Shanghai A-shares is having an extraordinary breakout out w/ huge volume confirmation. The traditional wisdom that a rising tide (flush liquidity) lifts all boats (assets) may not the obvious spillover trade for Bitcoin/crypto this time. Here's why.#Bitcoin #crypto #liquidity
While offshore sentiment for crypto remains somewhat buoyant (epitemized by Grayscale), the regulatory environment onshore has become less tolerant with increasingly tough crackdown measures on the OTC transactions and illegal activities aid by crypto transactions.
The covid-19 has largely evicerated household wealth, leaving fewer spares cash for speculative investing (still by and large the theme for Chinese investors). Without 2-way liquidity in and out of crypto, it's hard for any new CNY to find its way into crypto & vice versa.
Spot trading volume in crypto has been lackluster with derivatives being the main price driving force during range bound market. USD stablecoins are displacing traditional mainstay cryptos in the role of transactional mediums and even market cap.
Faith within mining community again starts to waiver (which is nothing new in&of itself) but new speculative themes of filecoin & DeFi are definitely nibbling at the limited attention/capital span of miners - disheartened by the lack of parabolic move accompanying the halvening.
At the end of the day, miners aren't all idealists and many have a profit bottom line. The same goes for bulk the speculative fast money managed by funds and trading houses who are behind some of the outbound asset rotation from crypto into equity & other headline-making markets.
Given the backdrop of various onshore crackdowns (toughest since Sep 2017), much of outbound capital from crypto likely won't have a red carpet rolled out to go back in the shadow, resulting in a more permanent outflow to the regulated mkts - a much-desired outcome for the govt.
New sec account opening in China saw fastest 3-month increase since 2017 (4.75mio Mar-May), The retail participation in this China equity bull run has been evident. Retail speculators prev overweight in shadow mkts of crypto & P2P may start to feel like a bag-holders here.
To me this snap rally in SHCOMP could be the start of sth significant - it offers the missing piece that's long stood in the way of Yuan's appeal - a mature securities mkt that offers investor protection, imparts wealth effect to the masses, and has well-behaved macro properties.
And this shift we see in China cracking down on shadow wall street and at the same time empowering shadow main street (e.g. street stall economy), is unlike to cast a positive spell for crypto.
Keen to hear your thoughts. @krugermacro @J0E007
