Unstoppable Investment Fervor Despite Regulations…Which Coins Are Chinese Investors Focusing On? [Kang Minseung's Altcoin Now]

After Donald Trump was elected President of the United States, the virtual asset (cryptocurrency) market, which had rebounded sharply, has recently shown a corrective trend. Meanwhile, in China, investment in high-volatility Altcoin (cryptocurrencies other than Bitcoin) such as Meme coin continues to receive attention. Market experts analyzed that although overall cryptocurrency market volatility has intensified recently due to Trump's 'tariff war,' the long-term bullish outlook remains valid.

Recently, as the adjustment of Bitcoin (BTC) has been prolonged, the upward momentum of Altcoin is also being limited. The price of the leading Altcoin, ETH, is trading at $2,701 (₩4,067,000 on Upbit) as of 1:58 PM on the 16th in the Binance USDT market, down 0.67% from the previous day. The relative value (ETH/BTC) of ETH compared to Bitcoin (BTC) has been on a weekly decline.

On this day, the dominance of Bitcoin (BTC) (the proportion of Bitcoin in the total market capitalization of cryptocurrencies) stood at 60.88%, continuing a downward trend for more than a week. As the price of Bitcoin has been moving sideways with little fluctuation recently, the declining dominance suggests that many Altcoins saw a stronger rebound.

"Despite China's Increasing Cryptocurrency Regulations...the Market Is Evolving with Decentralized Exchanges and OTC Trading"

Despite strong cryptocurrency regulations by the Chinese government, the enthusiasm of Chinese investors has not waned. China is employing a dual strategy, tightening cryptocurrency crackdowns within the mainland while actively supporting blockchain technology. For this purpose, China is positioning Hong Kong as the key hub of the cryptocurrency market.

Currently, China has completely banned ICOs, cryptocurrency trading, and mining on the mainland, but the scale of cryptocurrency investment appears to be increasing. Singapore-based crypto venture capital (VC) Foresight Ventures recently analyzed in a research report, "There is a widespread view that China has completely banned cryptocurrencies, but in reality, the Chinese cryptocurrency market still exists and is evolving in new forms."

The report continued, "In China, cryptocurrency trading mainly takes place via OTC trading," adding, "Institutions and venture capital are also actively participating in transactions." According to the report, Chinese investors held about 59 million cryptocurrencies as of last year. The report further analyzed, "Financial market development in China is slow and investment options are limited, so investors regard cryptocurrencies as a fast path to wealth creation."

In particular, Chinese investors are showing high interest in Meme coin including DOGE, DeFi coins, GameFi coins, etc. The report analyzed, "Chinese investors are mostly young individual investors who are also very interested in new technologies such as AI infrastructure, Layer 2 projects, and Bitcoin Ordinals." Chinese investors often use USDT and other Stablecoin to bypass capital controls, and, to avoid the authorities' surveillance, mainly utilize DeFi platforms and decentralized exchanges.

According to WeChat data, Chinese investors are most recently showing high interest in Bitcoin (BTC), DOGE, TON, USDT, ETH, SOL, SHIB, XRP, and more. In particular, Meme coin has gained enormous popularity, outpacing Bitcoin in WeChat search volume. Foresight Ventures explained, "Chinese investors are prone to risk-taking and strongly experience FOMO (fear of missing out when everyone else is making money but oneself)."

Meanwhile, some in the industry predict that cryptocurrency regulations may ease in China. This comes after the Shanghai court ruled in November last year that individual ownership of cryptocurrencies is not illegal. However, the court emphasized that while the property value of cryptocurrencies is recognized, they are not permitted as means of payment or investment. Recently, China has intensified its crackdown on illegal overseas asset transfers using cryptocurrencies.

Alongside this, there are claims that Trump’s pro-cryptocurrency policy could accelerate China’s market reopening. Xiao Feng HashKey Group CEO recently said in an interview with Hong Kong’s SCMP, "If the United States actively fosters the cryptocurrency industry, the timing for China to accept the cryptocurrency business could be shortened to within two years."

"Entire Crypto Market Bottoming Out Amidst Downturn…Possibility for Long-Term Bull Run"

Market experts believe that while the volatility of the cryptocurrency market has expanded recently, expectations for a long-term uptrend are increasing. The Altcoin market is signaling a bottom, but there are also forecasts that further short-term declines cannot be ruled out. In the crypto derivatives market, it is observed that a large volume of leveraged positions has been liquidated, providing a foundation for a rally.

Amid a downturn caused by Trump’s ‘tariff bomb,’ the crypto market is said to be finding stability as it establishes a bottom. Cryptocurrency data analysis company Santiment stated in a recent research report, "Volatility in the cryptocurrency market has intensified as Trump, the US President, announced new tariffs on Canada, Mexico, and China," adding, "Over $2 billion (approx. ₩2,879.6 billion) worth of leveraged positions was liquidated in major DeFi platforms in just one day."

The report continued, "This massive liquidation affected more than 700,000 crypto investors," but diagnosed, "In the end, it resolved excessive leverage and played a healthy corrective role for the market’s long-term rise." The recent surge in liquidation volume in the crypto derivatives market may be interpreted as a sign that the market is bottoming out.

Despite the extended correction, there are increasing views in the industry that long-term optimism is gaining ground. Global crypto exchange Bitfinex, in its weekly research report, stated, "The crypto market is highly sensitive to macroeconomic environments such as US labor market data and trade risks," but added, "There is still an optimistic atmosphere throughout the entire crypto industry."

In fact, after Gary Gensler, chairman of the US SEC—who had been called the 'grim reaper' of crypto—resigned last month, the number of cryptocurrency ETF applications in the US soared to 45. In addition, the US CFTC is reportedly discussing cooperation with the SEC to establish cryptocurrency regulations. Market participants expect that with the introduction of ETF and regulatory improvements, institutional investor entry will become even more active.

Furthermore, following the US presidential election, the liquidity of the crypto market has been rebounding. Crypto data analytics firm Kaiko said, "After the US presidential election, Altcoin market outlook and investment sentiment have improved, resulting in a surge in new Altcoin ETF applications and trading volume," but also analyzed, "current liquidity is concentrated around major Altcoins, and at the same time, a new market structure is forming where liquidity is distributed to some small Altcoins." Liquidity in the cryptocurrency market is said to be restructuring around blue-chip Altcoins and some small Altcoins.

Some predict that although there are signs of easing of US tightening policies, an 'Altcoin season' may not come soon. Well-known crypto analyst Benjamin Cowen recently said on his YouTube channel, "Fed’s quantitative tightening (QT) is still ongoing, and Altcoins overall are lagging behind Bitcoin, so it’s still difficult for a true Altcoin season to arrive." He explained that even during the 2017 bull market, the Fed's QT continued and afterwards, the market turned bearish.

There are also opinions that the crypto market may experience further short-term declines. Cowen noted, "The market cap of cryptocurrencies excluding Bitcoin and ETH continues to fall, and there’s a possibility of an additional drop of up to 16%," adding, "capitulation by investors seems to be approaching."

Meanwhile, optimistic long-term outlooks for the Altcoin market are also emerging. Famous crypto strategist Michael van de Poppe said on YouTube on the 14th, "Altcoins have not yet reached their peak in this cycle. This year, the 4-year cycle bull market could repeat itself, with a strong rally possibly occurring in Q4."

The strategist analyzed, "Altcoin value relative to Bitcoin is bottoming out. Since the market plunged earlier this month, the possibility of an Altcoin rebound has increased." He added that signs of an uptrend are appearing in some Altcoins, such as W, OMNI, REZ, and OP.

Kang Minseung, BloomingBit Reporter minriver@bloomingbit.io