Game Theory on potential scenarios of the Caixin article and China's ICO/Crypto ban
Lets discuss all the potential outcomes in the coming days. We cannot rule out each scenario but we can predict how each case might pan out. I will first discuss each scenario, then the price impact.
1. China follows through with Caixin's article. Bitcoin/Ethereum/Altcoins are banned. This will cause a severe drop in BTCCNY and a huge CNY and USD disconnect will happen. A huge premium delta in USD is already happening at around 12%, historically, I believe at one point CNY premiums were 15% higher than USD during 2014. There is currently no easy and fast method to move CNY->USD since the Chinese KYC rules and we might see this premium last for an extended period of time.
Bitcoin could fall to 20K CNY which is strong support, this corresponds to 3.1K USD. I am not sure if USD price will fall to those levels. You can clearly see GDAX price is hang on stronger than other exchanges. If premium stays the same, price target for 20K CNY in USD will be 3.5K USD
2. Caixin article is partially true. There are rumors that they will ban ICO and smaller exchanges but keeping the big ones open (OKC, HUOBI). Since most of the volume already happens on the big ones, I imagine the impact to be minimum. Volatility might be high, but price will recover to pre-ICO ban levels, 4600USD on finex.
3. Caixin released fake news, potential P&D. I imagine this will have minimum impact just like scenario #2. Hence price will recover to pre-ICO ban level at 4600USD.
If you look at the bigger picture, price is consolidating on relatively large volatility. Still bullish, but cautious. Lots of news driven price action, hopefully game theory helps. Don't be fooled that there are greater demand than ever from new account, use case, applications, those are lagging indicators like unemployment claims or job numbers. How else do you think we went from 1K to 5K?