Over the past week, many traders, analysts, and investors in the finance and cryptocurrency sectors have reacted to the crackdown on bitcoin by the Chinese government positively.
Investors such as billionaire early-stage investor Tim Draper, long-time bitcoin trader Josh Olszwicz, and prominent venture capital investor and Golden State Warriors owner Chamath Palihapitiya emphasized that the Chinese government’s decision to impose unnecessary restrictions on bitcoin trading and potentially bitcoin mining does not offer a real problem for bitcoin.
In an interview with Business Insider, Olszwicz stated:
“If it doesn’t affect the protocol, then it’s not a real problem. The bitcoin cash shakeup was much more worrisome from my perspective, but even then the core bitcoin protocol remained unaffected. Countries can try and ban bitcoin all they want, but people will still use it if they need and want to – the protocol doesn’t need government acceptance.”
Indirectly, Jamie Dimon, who previously condemned bitcoin with baseless arguments and illogical statements, explained bitcoin itself cannot be regulated censored as he explained that bitcoin is currently being used by many users in Venezuela who are trying to circumvent the government and existing financial systems. On CNBC’s Fast Money, financial analyst and bitcoin trader Brian Kelly criticized Dimon as he stated:
“I think Jamie Dimon is wrong. One, the genie is out of the bottle here. And also, Dimon talked about how governments are going to shut it down. Bitcoin is designed to go around governments. That is exactly what it was designed for and you are starting to see that. Jamie even said in his comments that if you are in Venezuela, it might be good to use bitcoin to go around the government, which is exactly the point.”
As Chamath Palihapitiya emphasized at the same banking conference, Dimon provided his comments on bitcoin, governments and financial regulators can only control the way bitcoin is effectively traded in regulated markets but outside of that, they cannot control bitcoin’s transactions and the facilitation of payments in its peer to peer protocol.
Strict regulations and impractical policies on bitcoin and cryptocurrency trading will lead to traders in China moving to nearby markets such as Hong Kong, Japan, and South Korea. The three markets have large-scale trading platforms such as Bitfinex, Bitflyer, and BitHumb, which are regarded as some of the largest cryptocurrency trading platforms in the world. More importantly, because the three markets are well regulated and structured, the shift in trading volumes into Japan, South Korea, and Hong Kong will create a more efficient, organized and stable global bitcoin exchange market.
As Draper explained:
“The deadwood of the Bitcoin ecosystem is leaving now. Our faith in the crypto economy will be well rewarded.”
In the upcoming months, China could take two completely opposing approaches toward regulating bitcoin. Some analysts including Jon Creasy explained that the Chinese bitcoin exchange market could be restored if Chinese President Xi Jinping becomes re-elected in November, as he has always been an avid supporter of free markets. But, the Chinese government could extend its ban on bitcoin trading to mining if the People’s Bank of China resumes the development of a government-issued digital currency.
Either way, experts like Draper perceives the restriction of bitcoin usage in China as a positive movement for the bitcoin industry as the Chinese government will no longer be able to manipulate the market.
Featured image from Shutterstock.
Last modified: May 21, 2020 9:14 AM UTC