Fantastic analysis of the current situation with China. I am surprised this thread has not gathered more momentum. In answer to your question about TaoBao, and in hopes of getting this discussion going again, I would imagine TaoBao/Alibaba sees the same writing on the wall as many of us do. I think the more important question you raised above is
"If you believe that the Chinese government is underhandedly trying to ban Bitcoin and all other virtual currencies you have to ask the question why are they not going after Huobi?"
The answer, I think, is why would they? Effective December 5th financial institutions are forbidden from dealing with bitcoin (and potentially with exchanges, depending on how you read the announcement). They have given 3rd party payment providers until the 31st of January to comply with their new rules. At this point Huobi hasn't really broken any rules, aside from using the CEO's personal bank account which from what I understand is at the least not acceptable and perhaps even illegal (maybe this is why they have switched to corporate account only). Perhaps the government is playing cool, not going to get into a panic about what this one exchange is doing. I think they are taking very deliberate actions to pour water over the bitcoin fire in China without looking like they are panicking and struggling to retake control. I guess we all have to wait and see.
I also agree fully with your analysis of what could have been the cause of the TaoBao/Alibaba decision to stop sale of bitcoin related items on its site(s). Alibaba is also working on their IPO, and it would make sense for them to put forth some friendly offerings to the government. And for anyone who has not read it, this opinion is mirrored in a thread here
https://bitcointalk.org/index.php?topic=406637.msg4407494#msg4407494 by user zhangweiwu.
Regarding your questions posted on the 8th:
Questions:
1) What are you (the Chinese Bitcoin investor) thinking about doing with your Bitcoins before the Chinese new year?
2) Do you think that the Chinese government will ban Bitcoins or just make it very difficult to invest in them?
3) Is there any regulation that prohibits Chinese citizens from trading Bitcoins in foreign exchanges?
Have a look at this survey from Sina.com
http://survey.finance.sina.com.cn/result/86550.html. Users of one of China's largest "infotainment websites" were asked (via Google Translate): "Do you still want to buy bitcoins" (你还想买比特币吗). Of the 3600+ respondents, 67.1%, answered "Don't Want To" (不想). I'm not pretending to know what bitcoin investors in China are thinking, but if my government told me I had X days left to withdraw money from a certain investment, I would get my money out asap.
I think that there are a few very important questions that are not really being raised or addressed on any of these forums:
1.) If Huobi has found a workaround for getting funds in/out of their exchange, why hasn't BTC China? They were the largest exchange in the world for a time, why would they just lay down and not fight? Wouldn't you think the investors who recently put $5 million into BTC China would be saying "hey, why don't you do what Huobi is doing"? Of course they did. The reason they aren't going this route is because they know what is about to go down. If you watch any of the interviews with Bobby Lee recently you can tell that he knows his time is up. Also, the fact that Bobby Lee was confirmed as the source for the December 16th news about 3rd party payment providers I think is important. Many people on this forum and on reddit are under the impression that Bobby Lee does not have enough "Guanxi" or relationships with the Chinese government, which is why Huobi has been able to pick up the volume that BTC China has dropped (and some). The fact that it was Bobby Lee who "leaked" that news shows that he at least has enough relationships to be the first to know about this back room meeting, and the fact that he is not using the same methods as Huobi to maintain his business says that he knows the writing is on the wall.
2.) I believe the most important question is how can Huobi, a previously unknown exchange, have built such a massive amount of volume in such a short time? As of today they have a whopping 74.31% of the global BTC market going through their exchange
http://bitcoinity.org/markets/list?currency=ALL&span=24h. It doesn't make sense. However, if someone wanted to make a mad dash just before the pending January 31st deadline, this would be the way to do it - create artificial volume to give the illusion of a bullish scenario, meanwhile pump the price up creating a very effective buying wall to sell into just before the new regulations took effect. I have no evidence that this is what they are doing, I am merely saying if someone wanted to do it, this is they way it would be done.
3.) (and perhaps @contactluis, with your background in the financial industry you are the best to answer this) If Huobi were to shut down tomorrow, what would the effect on price be? Or asked another way; what would the effect on the price of bitcoin in 74% of volume were to simply cease overnight?
Very well though out analysis @contactluis. And I'd love to hear your thoughts on the 3 points above
