The China Money Network released a “special commentary” which says Yuan fell “slightly lower than the end of December last year, but the rate of change is not large,” according to a google translation.
Zooming out of Yuan’s charts, the currency has fallen to its lowest level in seven years. Moreover, China’s reserves have fallen below the significant psychological threshold of $3 trillion, its lowest in five years, raising questions on whether the People’s Bank of China (PBOC), China’s central bank, can continue maintaining Yuan’s value – which fell yesterday.
Nonetheless, PBOC’s Weibo account, China’s Twitter, linked to the commentary highlighting: the “index of the RMB exchange rate depreciated slightly.”
“It can’t be mentioned” – one Chinese citizen replies sarcastically referring to news earlier in the year that China had ordered Chinese bitcoin exchanges to “not mention devaluation.”
“Unscrupulous Bitcoin only up not down. Pity my hard-earned money, hit my central bank face.” – replied another.
Some were sarcastically calling for PBOC to ban bitcoin so they can buy more or short it. “Please declare immediately that anyone holding Bitcoin is a crime, immediately shot.” – said one Chinese citizen. “Bitcoin rose I have to complain!” – said another, with a third adding “PBOC can you secretly tell me, how much you buy?”
Around 90% of the comments in reply were about bitcoin, mostly highlighting how it has gone up – unlike Yuan – but the trolling appears to go both ways.
When bitcoin’s price went up in 2013, PBOC kept making a number of statements that tended to send the price down. When it surpassed gold parity at the beginning of this year, PBOC declared they were opening an investigation in Chinese bitcoin exchanges. Price fell around $300, but stabilized.
It began to significantly increase earlier this month, rising around $170, but PBOC again intervened, apparently telling Bloomberg they were to hold a closed-door private meeting with Chinese bitcoin exchanges. Price immediately fell by around $30, but it has now somewhat stabilized.
“China bans bitcoin” has become a meme because every time price rises PBOC intervenes. It appears to be losing its effect, with the recent sharp price fall being just $30, presumably because the market has already priced in the investigation as well as its potential outcomes.
There are three main ones. The most unlikely: PBOC could actually really ban bitcoin. However, as the country has a huge bitcoin industry – especially in mining – which employs many, such draconian action might risk unrest, especially now that the Chinese economy has begun to slow down. The employees might protest, their families might join, other bitcoiners too, others dissatisfied with different matters, and a little snowball might turn into a full-blown avalanche.
A more likely outcome may be that PBOC nationalizes the exchanges, probably covertly. There have already been suggestions about a “third-party custodian,” but if that is a state authority it would open the country to accusations of protectionism and interference with the global free market.
The most desirable outcome is for PBOC to open a public global consultation on how exchanges should be regulated and what requirements should be imposed, but China remains an authoritarian and unfree country which doesn’t really do public consultations.
Considering the debacle of ghost towns and ghost industries caused mainly by the lack of such consultations, they may perhaps begin trying them, but they might just lay down the law, whether its citizens like it or not.
As all these scenarios have been previously discussed at length here on CCN and elsewhere, it is probable the market has priced them in, thus showing little price movements in response to PBOC related news compared to earlier in the year.
Their final decision on how they are to tread bitcoin is however much anticipated and may well decide whether China makes one of the biggest blunders of this century, or whether it welcomes new technology and becomes a responsible global player.
Image from Shutterstock.