China’s plan to ban crypto exchanges delivered a blow to cryptocurrency prices, but not all crypto executives are shuddering. Despite the facts that Shanghai has ordered exchanges within its jurisdiction to close and Shanghai-based BTCC’s plan to suspend trading by the end of September.
As of Thursday, Sept. 14, BTC/CNY had dropped to $3,251 on BTCC, $3,362 on OKCoin, and $3,321 on Huobi. This forced the global average bitcoin price down.
But as Chinese financial regulators finalized the nationwide ban on exchanges by providing leeway to OKCoin and Huobi, the two largest exchanges in China, to operate until the end of October, bitcoin price rebounded from $2,900 to $3,850.
Bitcoin Price Stabilizes
Over the past two days, after its initial surge, bitcoin price has remained relatively stable at around $3,580.
Local financial regulators in China clarified that they do not intend to ban bitcoin as a whole and some analysts in Beijing expect the bitcoin exchange ban to be temporary until the Peoples Bank of China releases a licensing program for trading platforms.
Some speculate that if Chinese President Xi Jinping becomes re-elected in November of 2017, President Xi, who is widely known as an avid advocate for free markets, could indirectly encourage local financial regulators to re-enable bitcoin trading and other cryptocurrency-related activities such as ICOs.
Regardless of China’s current regulatory activity, some crypto exchange executives point out that despite the immediate impact of regulation on crypto markets, crypto is more resilient than traditional equities since it is not interconnected with unknown counterparties. Some claim that ultimately, crypto will show that regulatory activity cannot impact crypto’s growth long term.
A Silver Lining In Regulation
“Already, we’ve seen about $60 billion in value wiped from the peak earlier this month, but there is a silver lining that may be hard to see through the clouds: regulators are starting to provide some clarity, and even if new rules aren’t ideal, they’re better than the uncertainty of potentially inferior regulation,” said Rob Viglione, co-founder of ZenCash, a privacy coin for borderless, decentralized communications and transactions.
“This comes after a recent regulatory ban in China of ICOs and JPMorgan’s Jamie Dimon calling bitcoin a ‘fraud’ that is set to ‘blow up,’” Viglione said.
“The big question is whether this shock is already internalized into asset prices, or if there’s risk of a continued cascading sell-off,” he said. “One good thing about crypto markets is that they are largely equity-based, and not massively interconnected webs of leveraged derivatives with unknown counterparties, as is the norm in modern banking.”
China’s ICO ban and the cessation of trading have a much smaller marginal contribution to systemic risk to cryptocurrencies than what has plagued large financial institutions like Dimon’s JPMorgan, Viglione said.
Decentralization Can’t Be Stopped
“For those of us in the exchange space, the possibility of governments clamping down on exchanges is a foregone conclusion ever since bitcoin was first noticed by the government,” said Bharath Rao, CEO of Leverj, a decentralized platform for cryptocurrency derivatives trading. “The price is always a solid metric of the markets’ greed and fear, and reflects regulatory uncertainty at the moment. This also signals that development of non-custodial and decentralized models will accelerate.”
Rao said regulation is neither necessary nor possible for decentralized models, and the future may have gotten just a bit brighter by nudging the crypto community to develop high-speed, non-custodial exchanges.
Jason English, vice president of protocol marketing at Sweetbridge, a global alliance seeking to use blockchain to create a liquid supply chain, thinks China has too much at stake with cryptocurrency to try to eliminate it..
“China is practically building a cottage industry for mining and exchanging bitcoin and other cryptocurrencies, so it is hard to believe that they intend to exit a market with so much potential upside,” said English. “Even the apparent ban on ICOs seemed to be more of a stopgap in order to get some policies in place. If anything, this example shows the volatility of the space and that some market makers can likely take advantage of an unclear news cycle to create a sell-off and buy back opportunity.”
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