Understand with Five Charts: Where Does the Market Go After Each Policy Storm?

Summary: The familiar script returns—after this regulatory crackdown, is it a sign of an impending downturn, or the start of yet another “sell-the-news” rebound? Let’s look through five key policy milestones to understand the trajectory after the storm. Authors: Viee, Amelia, Denise | Biteye Content Team

Recently, seven major financial associations on the mainland issued a new risk alert, specifically naming stablecoins, RWA, and “air coins” among various virtual assets. Although Bitcoin hasn’t shown major volatility, recent market cooling, shrinking account balances, and USDT trading at a discount over-the-counter have reminded many of previous rounds of policy tightening.

Since 2013, mainland China has entered its twelfth year of crypto regulation. Every policy move is met with a market response. This article follows the timeline to review market reactions at those key moments and to clarify one big question: After regulation lands, does the crypto market go quiet, or does it gather strength for another run?

1️⃣ 2013: Bitcoin Defined as “Virtual Commodity”

On December 5, 2013, the People’s Bank of China and four other ministries jointly issued the “Notice on Preventing Bitcoin Risks,” for the first time clearly defining Bitcoin as a “particular virtual commodity,” lacking legal tender status, and not considered currency. Banks and payment institutions were banned from servicing Bitcoin transactions.

The timing of this notice was significant, arriving just after Bitcoin hit a historical high of about $1,130 at the end of November. In early December, Bitcoin fluctuated between $900–$1,000, but just days after the policy, the market cooled rapidly. By the end of December, Bitcoin closed at around $755, a drop of nearly 30% for the month.

Over the following months, Bitcoin entered a prolonged downward consolidation phase, mostly trading between $400–$600. This drop from the peak effectively ended the 2013 bull market. Bitcoin prices stayed below $400 until the end of 2015.

The first round of regulation extinguished the early flames of frenzy and kicked off the tug-of-war between policy and the market.

2️⃣ 2017: ICO Ban and the “Great Migration” of Exchanges

2017 was an exceptionally heated year for crypto, and also the year of the most decisive regulation. On September 4, seven ministries issued the “Announcement on Preventing Risks of Token Issuance Financing,” labeling ICOs as illegal fundraising and ordering all domestic exchanges to shut down. Bitcoin closed near $4,300 that day, but within a week, BTC briefly fell to $3,000.

However, while this regulation cut off the dominance of mainland exchanges in the short term, it couldn’t shake the foundations of the global bull market. As trading activity quickly migrated to Singapore, Japan, and South Korea, Bitcoin rebounded sharply after a period of cleansing. By December 2017, just three months later, Bitcoin’s closing price had soared to $19,665.

The second round of regulation caused short-term turmoil, but also invisibly propelled global expansion.

3️⃣ 2019: Targeted Local Crackdowns

Starting in November 2019, regions like Beijing, Shanghai, and Guangdong began investigating crypto-related activities, with regulation shifting to “targeted local crackdowns” that were no less strict. That month, Bitcoin fell from over $9,000 to around $7,700, and market sentiment slumped.

The real trend reversal came the following year. In 2020, driven by the Bitcoin halving narrative and global liquidity easing, Bitcoin rallied from $7,000 to over $20,000, setting the stage for the epic 2020–2021 bull market.

The third round of regulation, in a sense, cleared the path for the next leg up.

4️⃣ 2021: Full Clampdown, Mining Shutdowns

2021 saw regulatory intensity reach its peak. Two landmark events this year completely reshaped the global crypto market. In mid-May, the State Council’s Financial Stability and Development Committee called for a crackdown on Bitcoin mining and trading. Major mining provinces like Inner Mongolia, Xinjiang, and Sichuan soon enacted shutdown policies, triggering a nationwide “mining blackout.” On September 24, the central bank and nine other ministries jointly issued the “Notice on Further Preventing and Dealing with Risks of Virtual Currency Trading Hype,” officially designating all virtual currency activities as illegal financial activities.

In May, Bitcoin fell from $50,000 to $35,000. In June and July, BTC consolidated between $30,000–$40,000, with market sentiment at rock bottom, but by August, Bitcoin rebounded and, fueled by global liquidity optimism, climbed to a new all-time high near $68,000 in November.

In this fourth round, policy could draw the boundaries but couldn’t stop the global redistribution of computing power and capital.

5️⃣ 2025: The Narrative Reverses—From “Experimenting with Innovation” to “Full Tightening”

The regulatory narrative of 2025 is full of dramatic twists. In the first half of the year, a series of signals gave the market a sense of “ice thawing,” with cautious optimism spreading: from Hong Kong’s discussions on stablecoin issuance frameworks to the “Malv Grapes” on-chain project in suburban Shanghai, the market began discussing “compliance paths” and the possibility of a “China model.”

The wind changed suddenly at year’s end. On December 5, the seven major financial associations issued a risk alert with a clear message: — Virtual currencies are not legal tender — “Air coins,” stablecoins, RWA, and other hot concepts are named as targets for crackdown — Not only is domestic trading banned, but also promotion and sourcing of traffic; regulation is becoming more granular

The core upgrade this time: It not only reiterates the illegality of virtual currency trading but, for the first time, extends to the hottest new sectors (stablecoins, RWA) and promotional activities.

So, how will the market react this time? Unlike before, Chinese capital no longer dominates the market; Wall Street ETFs and institutional holdings are now the main force. What’s clear is that USDT is trading at a discount, showing many are rushing to cash out and exit.

6️⃣ Market Voices: KOL Opinions

Well-known media figure Wu Shuo @colinwu, from an execution perspective, urges everyone to watch the moves of CEXs. The real wind direction will depend on whether platforms restrict domestic IPs, KYC registration, and C2C features.

XHunt founder @defiteddy2020 compares mainland China and Hong Kong, arguing that the fire-and-ice approach to crypto policy reflects different market positions and regulatory philosophies.

Solv Protocol co-founder @myanTokenGeek believes this round of regulation may lead to two outcomes: users and projects accelerating their move overseas, and the resurgence of underground gray channels.

Shanghai Mankun Law Firm founder, lawyer Honglin Liu @Honglin_lawyer, adds a legal perspective: many RWA projects are indeed non-compliant, using a pretense of compliance to raise money and pump prices, essentially no different from fraud. For truly committed teams, going overseas is the only solution.

Crypto OG @Bitwux believes this is the authorities confirming what the industry already knows, so the impact is limited. The main point of regulation is to reiterate old messages, with the focus likely on preventing gray channels from leaking out.

Independent trader @xtony1314 says this time it’s led by the police, so it’s not just talk anymore. If enforcement starts—platform shutdowns, trading restrictions—it could trigger a wave of “voluntary exits + market stampede.”

Independent trader @Meta8Mate notes that every time a concept overheats, there’s a risk alert: 2017 was ICOs, 2021 was mining, now it’s stablecoins and RWA’s turn.

7️⃣ Conclusion: The Storm Never Stops the Tide—It Only Changes the Course

Looking back over these twelve years, a clear, evolving, and determined logic emerges: Regulation is consistent and, when necessary, reasonable. A grain of sand from the times can be a mountain to the individual. The impact of regulation on the industry needs no further elaboration, but we must admit: regulation is there to protect investors from uncontrollable financial risks and to maintain domestic financial stability.

Regulatory intervention is highly “timed.” Policies typically land when the market is overheated or at a local peak, aiming to cool down excessive risk. From the tail-end of the 2013 bull run, the ICO frenzy in 2017, the 2021 mining peak, to the current hype in stablecoins and RWA, the pattern is clear.

The long-term effect of policy is waning. Except for the first round in 2013, which directly ended that bull cycle, subsequent strong interventions (2017 exchange shutdowns, 2021 mining exodus) did not alter Bitcoin’s long-term bull trend.

Bitcoin has become a “global game.” Wall Street ETFs, Middle Eastern sovereign wealth funds, European institutional custody, and worldwide retail consensus together now underpin current prices.

A core conclusion: The binary pattern of “impenetrable East” and “price-setting West” may become the new normal in the crypto world.

*Data sourced from public platforms. Content is for informational sharing only and does not promote or endorse any tokens. Please strictly comply with local laws and regulations and do not participate in any illegal financial activities.