Silencing the Hype: China's Regulatory Shock and Bitcoin Market Maturity

Abstract

We investigate whether China's 2021 mining ban transformed Bitcoin from a speculative vehicle into a macro-sensitive asset. Using daily data from 2017-2025, we document a decisive structural break. Pre-2021, volatility was endogenous, driven by raw trading volume rather than fundamentals. Post-ban, however, internal microstructure noise loses predictive power. Instead, volatility is now driven by macroeconomic anxiety: Wikipedia searches for "Inflation" improve forecast accuracy by over 7%. We further uncover a "dual narrative" where inflation attention predicts crash risk, while "Recession" queries (pivot speculation) drive rallies. These findings suggest the regulatory shock successfully curtailed noise trading, allowing macro-fundamentals to dominate price discovery.