We do not know how many coins the Chinese traders still have, in-exchange and off-exchange. We do not know how much CNY can enter the exchanges. (The convenient channels have been blocked, but there are still some less convenient ones, and they may be enough for a few traders to move large amounts.)
Right now it seems that the Chinese traders too are uncertain about what the price will do. Some traders probably dumped their coins and left the game, but many apparently are still there, waiting. Volume is small compared to the good old days, but still large compared to the Western exchanges. The latter still seem to track Huobi and OKCoin more than the other way around.
It seems likely that there will be further bad news, such as other exchanges closing, or the loss of some of those roundabout deposit channels. However, in the short run those news may cause the price to go up rather than down, since they may create demand for BTC as a way to leave and/or continue speculating. Eventually, however, more coins must move from the Chinese exchanges to the Western ones, so the price should go down. The momentary dip on Apr/12, to 2230 CNY = 340 USD, shows how far down it could go.
PS. Note that the market does not react to "news", it reacts to facts (real or false) that it learns from the news...
You are saying that the following may be potential bad news:
1. Other (Chinese) exchanges closing; and
2. Loss of roundabout deposit channels.
(1) can happen to small exchanges, as had happened to FXBTC. It is unlikely to happen to large exchanges, which are backed by large VC funding. If China bans exchanges or btc explicitly, then VC funding is irrelevant. But this is unlikely. Hence, (1) has little effect on price.
Most of the fund came from bank deposits. A smaller portion came from (2). (2) should have a larger impact on price than (1). Even so, it has been priced in to a large extent owning to the ban on bank deposit.
Please suggest worse potential news. Then we can analyse its impact on price. Thank you.
FXBTC was not that small: it used to have 20'000 BTC daily volume, which is 2-3 times Btstamp's typical volume.
http://www.coindesk.com/chinas-bitcoin-ecosystem-undeterred-by-fxbtc-exchange-closure/ (Yes, yes, I know, it must be "fake". Like almost everything in bitcoinland it seems.
)
The VC funding for the "large" exchanges was granted back when they were thought to have found a stable compromise that would let them prosper indefinitely; some of that was granted back in December IIRC. Anyway, venture capital is by definition invested in high-risk businesses, so having VC funding will not be an obstacle for failure.
According to a Chinese article posted here a few days ago, the revenue of Chinese exchanges came mainly from trading against their own clients (exploiting both advance information about PBoC and bank actions, and "high-frequency" trading) and from interest on leveraged trade. I suspect that their clients beame aware of the former, and that may have influenced the "five exchanges resolution". In an effort to clean up their image before the government and perhaps win back their estranged clients, they stopped leverage trading and promised to charge fees from HFT. Indeed, trading at Huobi, at least, seems to be much slower now.
So their revenue must have been shrinking. Will Huobi make enough to pay their, 20(?) call-center staff and 30(?) other staff?
At the moment, Chinese traders can still use banks for withdrawals and perhaps for some deposits (e.g. to recharge their daposit cards or pay OKCoin's brokers.) It seems at least possible that these channels too will be closed. If CNY withdrawals are closed
with previous warning, there may be a rush to sell BTC, hence a price drop. If an exchange blocks CNY withdrawals
without prior notice (very unlikely IMHO) price will shoot up in that exchange but drop elsewehre.
Poll
