Earlier today, on September 12, bitcoin price briefly hit $4,400 after recovering from a major correction caused by the report of Chinese state-owned news publication Caixin on the potential bitcoin exchange ban by that was supposedly suggested local financial regulators.
However, bitcoin’s short-term recovery was held back by a flash crash in the Chinese bitcoin exchange market, triggered by a series of false news in regard to the Chinese central bank, the People’s Bank of China’s pending decision to temporarily suspend bitcoin exchanges.
As a result of the flash crash, bitcoin price briefly surpassed the $4,400 mark and dropped down below $4,300 again. By the end of the day, bitcoin price stabilized at $4,250, recording a $150 decline after briefly recovering back to $4,400.
In a previous coverage, CCN.com explained that China’s three largest bitcoin exchanges OKCoin, Huobi and BTCC have not received any directives from PBoC or information on any potential regulation updates. The three exchanges, OKCOin in particular, emphasized that since November of 2016, Chinese bitcoin trading platform operators have closely cooperated and collaborated with PBoC and local financial regulators and inspectors from PBoC. Hence, it is unlikely that PBoC would dismiss all of its past efforts and works with local exchanges by issuing an abrupt ban on bitcoin exchanges.
In late 2016, PBoC and local financial regulators came to a consensus to regulate the bitcoin market and its trading platforms because if bitcoin trading activities migrate to over-the-counter and peer-to-peer platforms such as LocalBitcoins, bitcoin becomes even more difficult to regulate. By enforcing strict Know Your Customer (KYC) and Anti-Money Laundering (AML) systems onto local trading platforms, the Chinese government has successfully created a database of bitcoin users in China that it can use for law enforcement, investigations and legal purposes. It is highly unlikely that the Chinese government would allow bitcoin trading activities to be done in P2P markets and simply ban trading platforms as a whole.
It is also important to acknowledge that daily trading volumes of the Chinese bitcoin exchange market have come close to that of the US. Demand toward bitcoin as a safe haven asset and as a currency is still increasing rapidly in China and it has been evident through the exponential rise in trading volumes of the Chinese market. If it was a sell-off, bitcoin price in the Chinese market should have decreased substantially. But in actuality, bitcoin price increased by over 10 percent in the past three days.
With SegWit-enabled transactions accounting for more than 2 percent of global bitcoin transactions and miner support toward SegWit also growing, in the short-term, bitcoin will experience a drastic improvement in usability and scalability. As bitcoin continues to scale, it will appeal to more users in the finance sector and in the cryptocurrency space.
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Last modified: March 4, 2021 4:59 PM