The People’s Daily, the official newspaper of the Chinese Communist Party and the biggest newspaper group in China, recently published a piece calling bitcoin a bubble, and comparing the cryptocurrency to the 17th-century Dutch tulip bulb bubble., just like JP Morgan’s Jamie Dimon did.
The piece initially mention’s bitcoin’s growth in 2017. The cryptocurrency surged from under $1,000 to over $19,000 last year, before it plunged back to $13,000. It has since recovered and is currently trading at $14,599, according to CCN’s price index. Taking into account its volatile price and astounding growth, the People’s Daily asserts it’s a fact bitcoin is a bubble
“Irrespective of whether it is assessed on price or value, bitcoin is flooded with froth,” it reads (rough translation). “Its so-called advantages – scarcity, authenticity, strong liquidity, transparency and decentralization – are only covers for speculation and cannot support its volatile price.”
Per the piece, bitcoin’s bubble was created by a combination of speculation, hype, mystery, and decentralization. The piece’s author, Wei Liang, even hints at possible insider trading, suggesting bitcoiners with a large amount of bitcoin manipulated investors to fuel speculation and further drive the cryptocurrency’s price up.
It adds that bitcoin isn’t recognized as a currency throughout the world, and that financial regulators “naturally do not regulate bitcoin as much as they do other currencies,” leaving the cryptocurrency in a “special gray area,” and uses bitcoin futures on regulated exchanges as an example of how the cryptocurrency is being protected.
The People’s Daily then compares the cryptocurrency to the Dutch tulip bulb bubble, implying bitcoin’s bubble will burst once governments around the world start regulating it. As such, caution is advised as bitcoin’s price has in the past seen sharp falls and its “future direction is particularly alarming.”
This isn’t the first-time Chinese officials express their aversion to bitcoin. Last month, as reported by CCN, a People’s Bank of China (PBoC) official stated he thinks bitcoin will end up floating down a river, as a dead body.
The piece comes at a time in which it’s been revealed Chinese authorities won’t ‘ban’ bitcoin miners, but will remove their preferential treatment in local provinces. This means preferential policies in electricity consumption, land use, and tax cuts may soon be gone for Chinese bitcoin miners.
Last year, China’s central bank, the People’s Bank of China, enforced a blanket ban on all initial coin offerings (ICOs), a day after the Leading Group of Beijing Internet Financial Risks Remediation mandated the shuttering of cryptocurrency exchanges in the country. Since then, investors reportedly started using unregulated peer-to-peer exchanges. According to the South China Morning Post, the number of peer-to-peer exchanges in the country surged from four in October to 21 by the end of November.
Interestingly, bitcoin’s price seems to be mostly unaffected by China’s recent moves. When news of the crackdown first came out, the cryptocurrency’s price crashed. As reported, a ‘crackdown’ on bitcoin mining could be beneficial for the wider ecosystem, as it could decentralize the majority of the mining hashrate.
Featured image from Shutterstock.
Last modified: May 21, 2020 11:22 AM UTC