Vitalik Buterin has written a wonderful article about ‘Bitcoin: China’s New Special Economic Zone‘ over at Bitcoin Magazine. While it may be quite some time before China’s government actually admits that it has allowed Bitcoin to be a sort of Special Economic Zone [SEZ], spectators around the world are eagerly awaiting where Bitcoin will go next.
Elsewhere around the world, and perhaps especially in China, speculators [a special type of spectator] are loudly and belligerently jumping ship. I present to you this excerpt from Buterin’s article that sums up this First Chinese Bitcoin Bubble:
The trigger that many felt was the true turning point that started the rapid rise, however, was Baidu Jiasule, a subsidiary of Baidu, accepting Bitcoin for its services. Soon after that, China Telecom, a state-owned telecommunications company that is the second largest in the industry in China, also started accepting Bitcoin for reservations of their latest Samsung phone. These two companies, the so-called “Chinese Google” on the one hand and a state-owned telecommunications company on the other, were seen as by far the largest endorsement of Bitcoin that has ever happened to date. And now, in the span of a few hours, they are both gone.
In reality, however, the influence of both companies has always been overhyped. The Baidu announcement was not “Baidu accepting Bitcoin” to anything close to the extent to which, say, Namecheap accepts Bitcoin for its entire array of products and services. Rather, Baidu Jiasule is only one small subsidiary of Baidu. In fact, the company received very few actual customers – the 1.37 BTC that the company did receive was the product of Western Bitcoin users sending Baidu donations to show support. Similarly, in the case of China Telecom, China Telecom was not accepting Bitcoin for its telecom services; it was only taking it for pre-orders of the latest Samsung phone. The Chinese economy is much more organizationally centralized on both a government and corporate level, but what many do not understand the system to some extent naturally compensates for this to a partial extent by giving individual corporate divisions and local governments considerably more independence. Although Baidu Jiasule almost certainly did get approval from Baidu’s management before taking Bitcoin, neither Baidu mangement nor Baidu Jiasule ever intended for the announcement to be anything close to a company-wide endorsement. Now, the portion of the Bitcoin bubble that relied on this mistaken assumption can be officially considered to be popped.
There has been an inordinate amount of information and sentiment lost in translation in the last few months as weaker and weaker hands have jumped onto the Bitcoin bandwagon; personally, I suspect that the majority of that bubble was caused by Westerners that to this day still are unaware that Baidu Jiasule is but a small subsidiary of Baidu. Furthermore, they are unaware that China already has harsh rules against “virtual currencies” in place and Bitcoin being classified as a “virtual commodity” is the brightest Green Light that Bitcoin has ever received.
I hope that those investors/speculators/spectators that are turned away by their short term losses trading Bitcoin are turned away for good. The type of people that don’t understand the true value of Bitcoin as a protocol are the exact same type of people that panic sell and exacerbate the volatility of the Bitcoin exchange rate. Very very simply, they are the problem that they see in Bitcoin.
Have a cryptic day, mis amigos.
Last modified (UTC): December 19, 2013 19:44