First Mover Asia: Deconstructing Crypto's China Narrative

ALSO: Here's why it's important bitcoin hits $30,000

AccessTimeIconFeb 22, 2023 at 1:57 a.m. UTC
Updated Feb 22, 2023 at 3:10 p.m. UTC

Good morning. Here’s what’s happening:

Prices: Bitcoin can't seem to break past the $25K mark. But when it does, $30K is the next important milestone. Here's why.

Insights: Some of crypto's China narrative is old, some of it is new. Is the market treating this irrationally?


$30,000 is Bitcoin's Next Important Milestone

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S&P 500
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+4.8 0.3%
Nikkei 225
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BTC/ETH prices per CoinDesk Indices, as of 7 a.m. ET (11 a.m. UTC)

Bitcoin is lingering around $24,400 as Asia begins its business day, down 1.6% in the last 24 hours. Ether has also experienced a slight correction too, down 2.3% to $1,661.

Some of the "China coins" that surged over the last week are also seeing a slight correction. Conflux (CFX), which is up a staggering 485% during the last week, is down 4.7% on the day.

Gareth Soloway, chief market strategist at Verified Investing, says the China narrative continues to be what’s attracting new bitcoin buyers.

“The big question is, in spite of interest rates going up and the dollar gaining strength, is there a catalyst that can push it over [$25,000]?” he said during an interview on CoinDesk TV. “I think this narrative out of Hong Kong could be something that helps.”

Soloway points to the 200-weekly moving average as being $25,000, which creates a strong resistance level with some headwinds.

“If we can punch through $25,000 and get above that level, it’s a straight shot to $30,000,” he said.

That figure is important because in 2021, he says, $30,000 was the midpoint low for the year. Prices came down from an April 2021 high of $60,000 to $30,000 at the end of July before rallying back to around $69,000 in November.

“If we can retrace and get back above $30K, that would solidify that the lows are in for crypto,” he said. “I still think that there are some nervous issues out there the market has to resolve, but $30K being recaptured would put that to rest.”

Biggest Gainers

Asset Ticker Returns DACS Sector
Avalanche AVAX +2.4% Smart Contract Platform
Stellar XLM +0.6% Smart Contract Platform

Biggest Losers

Asset Ticker Returns DACS Sector
Polygon MATIC −5.4% Smart Contract Platform
Decentraland MANA −4.6% Entertainment
Gala GALA −4.5% Entertainment


Any token that’s China-related is currently off to the moon.

Conflux (CFX) has risen 467% during the last week, according to CoinGecko data, while NEO is up 51% and filecoin (FIL) is up 60%.

The "China narrative" has been used to sell the next bull market.

But what exactly is this narrative?

Some of it is new, some of it is old. And some of it is more hype than substance.

Hong Kong and retail crypto traders

Hong Kong’s Securities and Futures Commission (SFC) is starting a consultation process for licensing crypto exchanges to serve retail investors. The SFC spent the last few years working on a consultation plan for Professional (accredited) investors, which goes live on June 1.

Stablecoins are also set to be regulated in the city, and it's likely that they will be using locally incorporated institutions and trusts.

CoinDesk has asked Tether, Circle and Paxos if they would be interested in applying to be regulated under Hong Kong’s proposed stablecoin regime – so far none have responded.

Don’t expect super-leveraged crypto degeneracy when this launches. Regulators are talking about things like "approved tokens" and "risk profile." This is likely going to be a controlled, calm walled garden of crypto.

Crypto is already widely available in China

Officials from China’s Liaison Office are apparently interested in Hong Kong’s progress with crypto, and have been reportedly stopping by conferences and meetups in the City.

Some say that this is a blessing. China can study Hong Kong’s approach to crypto much like it learned from Hong Kong about open markets.

Still, there is no shortage of crypto available in China, through domestic payment rails.

CoinDesk - Unknown
CoinDesk - Unknown

Both OKX and Binance offer active over-the-counter crypto markets for USDT, ether, bitcoin and other major cryptos. Payment is done via WeChat or a domestic bank transfer.

Anyone who wants crypto in China already has it.

Conflux and blockchain SIMs

Part of Conflux’s sharp rise has been attributed to its announcement that it is working with China Telecom to build blockchain-based SIM cards, complete with all the Web3 terminology to get people excited like metaverse and proof of work.

But Blockchain SIM cards aren’t anything new. This isn’t China Telecom’s first attempt at it.

Back in 2018, China’s telecoms started to explore blockchain technology. In 2019, China Telecom began pitching the idea of a blockchain SIM with the buzzwords of the day: internet of value, internet of things, 5G. A deck advertising the technology from 2020 talked about how digital ledgers could help carriers reconcile billings.

A spokesperson for China Telecom didn’t respond to a request for more technical details by press time.

Around the same time, Verizon won a patent for a blockchain-based SIM card it was calling vSIM. Verizon’s exact approach didn’t win out, and what it was describing has become eSIMs.

It’s also important to remember the Conflux operating within China isn’t the same Conflux you access with the CFX token.

The version of Conflux that has been funded by various provincial governments in China, such as Hunan and Shanghai’s city government, doesn’t have a token and uses a made-in-China encryption protocol. The same team is behind it, and the tech is mostly the same, but China’s version of the chain doesn’t touch the global version.

Tony Ling, a China-based partner at Bizantine Capital, calls Conflux a “one country, two systems” blockchain, noting that its chain and performance is strong but development has been restricted due to compliance with domestic policy.

“It has no [cryptocurrency] in China, it may be somewhat different from traditional public chains,” he said. “Conflux is the only public chain recognized by the government in China.”

What’s old is new again

Finding the catalyst for China’s crypto boom is tough.

Hong Kong allowing retail crypto is a long way off. Authorities there are only in the consultation stage, and even when it launches it's going to be a controlled environment.

That said, crypto is already widely available in China, albeit through gray channels like OTC desks. But it’s as simple as using a virtual private network to access Binance or OKX then completing a transaction with WeChat Pay.

Conflux has been around for a while. Blockchain SIMs aren’t a new idea and haven’t yet taken off.

Maybe it’s just the economy? China’s "home team" tokens are rising because the stock market is up.

Craig Erlam, a senior market analyst at Oanda, outlined this thesis in an earlier interview with CoinDesk.

“The bullish case for the Chinese economy remains solid, and the likely release of stimulus over the next couple of months as it gathers pace could supercharge that,” he told CoinDesk in an email. “Domestic demand is going to be the cornerstone of the economic revival, and policymakers appear poised to unleash that to its full potential.”

The Hang Seng Index is up 4% in the last six months as the market looks forward to China’s post-COVID-19 reopening and domestic consumption coming back.

Time to see how strong the correlation with crypto is.

Important events

9:00 a.m. HKT/SGT(1:00 UTC) New Zealand Monetary Policy Statement

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