When China banned bitcoin, Chinese volume already composed a majority of the market -- at least, I believe this is true if memory serves correctly. The fundamental driver was capital controls, and an eventual ban was very clearly inevitable due to pressures on the exchange rate represented by this free capital flow on top of independent monetary policy. And when it happened, it caused a correction. It can also be argued that the fundamental value of bitcoin should have likewise diminished, due to a massive and overnight drop in accessibility by the most directly affected and important demographic. And so it was the end of bitcoin, right?

Well, no. I live in China and some quick searches turn up thousands of sellers and buyers in major cities. I can't vouch for their effectiveness or safety, but the end result is that a decrease in liquidity does not always translate to a permanent proportional decrease in fundamental value. The reaction to the bitcoin ban was a buying opportunity.

Next, Monero will always be tradeable with bitcoin on-exchange somewhere in the world (and kovri may help further). So, even if liquidity drops, it will always have fundamental value in its ability to clean up the history on bitcoin transactions. If Monero is illegal, I can just convert some to bitcoin and spend the bitcoin.

In conclusion, I think both the bulls and bears are right about the effects, but they're not operating on the same time frame.