The price of bitcoin has substantially decreased over the past few days after it reached a multi-month high of US$740 on major exchanges. Experts unanimously agree that the price has fallen due to the inaccurate reporting of “capital controls” the Chinese government is supposedly planning to impose on bitcoin.
Currently, 95% of bitcoin trades are handled and processed by Chinese exchanges in its local market. Major Chinese bitcoin exchange BTCC alone handles a daily trading volume of 1.9 million bitcoin, which is larger than cumulative trading volume of Japan and US-based exchanges.
Since mid-October, high profile analysts and mainstream news networks speculated that the Chinese government’s crackdown on Wealth Management Products (WMPs) led the price surge of bitcoin, as it forced Chinese investors that held US$1.3 trillion in assets to look for alternative stores of value.
Almost immediately after the establishment of various regulatory frameworks on WMPs and the devaluation of the Chinese yuan, the bitcoin price surged and it easily surpassed 5,000 CNY on Chinese exchanges, which is equivalent to US$740.
Considering the Chinese market’s massive bitcoin daily trading volume of US$3.75 billion, which is equivalent to 5.3 million bitcoin, it was relatively obvious that the government’s attempt to steer investors away from WMPs allowed the bitcoin price to climb
China Bans Bitcoin Controversy
However, a recent controversial announcement from “Chinese officials” supposedly covered by multi-billion dollar financial institutions including Bloomberg left the Chinese bitcoin market in panic, as traders and investors were told that the cryptocurrency was going to be heavily regulated.
Bitcoin enthusiasts and experts quickly began to suspect the legitimacy of Zerohedge’s report, considering that the original article which Bloomberg supposedly published couldn’t be found. There exists no trace of Bloomberg ever mentioning any activities from Chinese officials and due to this lack of sources, Zerohedge’s report was almost instantly discarded.
Various experts and traders including Tuur Demeester reassured other traders and bitcoin holders that long term uptrend is still foreseeable and that the misreport on China’s stance on bitcoin trading was inaccurate.
ShapeShift CEO and highly respected bitcoin entrepreneur Erik Voorhees further emphasized that Zerohedge and other publications faked bitcoin panic for undisclosed motivations.
Some CEOs in the bitcoin industry including Vaultoro CEO Joshua Scigala took the initiative to reach out for other bitcoin companies and experts in China in regards to this situation. He noted that Chinese officials remain a positive attitude towards both blockchain and bitcoin development and its government is not planning to impose any heavy regulations on bitcoin trading as stated by Zerohedge.
Thus, as Demeester suggests, the long-term trend of bitcoin price remains optimistic and it is highly likely that the value of bitcoin will soon recover.
Featured image from Shutterstock.
Last modified: March 4, 2021 4:52 PM