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The Chinese Cryptocurrency “Ban”

October 4, 2017 3:45 pm Published by

Bitcoin and the whole cryptocurrency industry has taken quite a hit with a surprising ban on large exchange trading issued by the Chinese government. It was always a worry with the cryptocurrency industry. Most large exchanges stopped trading by the end of September 2017.

People can still trade over the counter and cryptocurrencies have by no means been made illegal, but a stop has been put to all large trading exchanges. China is said to account for over 35% of all Bitcoin trades and is also home to many of the world’s biggest bitcoin miners – The people who keep the whole bitcoin show running.

The Implications

This is not the first time that China has intervened in the crypto market. In 2013, it banned large institutions from trading bitcoin, and it issued a four-month freeze earlier this year due to security concerns.

Now, the 3 largest China exchanges- Huobi, OKCoin, and BTC China – have confirmed that they will be shutting down trading operations by the end of October. These exchanges will remain open and will continue to operate on associated services. They might live to see the restrictions lifted. Unfortunately, smaller exchanges were not so lucky, with Yunbi expected to shut down this September due to the recent regulation.

It was never much of a secret that a lot of cryptocurrency trading took place in China. In fact, one of the most oft-cited reasons for the inherent instability of Bitcoin was that most trading volume is in China, who have a history of market interventionism, and that when they issued the ban Bitcoin would fall drastically and irreparably.

And this is true, it has fallen, nearly 30% in the week of the announcement of the government regulation. China’s crackdown includes a ban on Initial Coin Offerings, the main method through which funds are raised for new digital cryptocurrencies. Some cryptos such as Stratis and Zerocoin have suffered a 50% loss since the announcement.

The industry is anything but stable, and it has to be said that the industry, which tends to go up and down together, was hit hard.

What is interesting to observe is that Bitcoin seems to be the least affected by the ban. Other currencies are down 50%, but as of the time of this writing, Bitcoin is only down about 20%, from $4800 to $4000.

Nothing to Worry About?

All in all, there is little to worry about. Few other industries have suffered so much at the hands of pundits, academics, and the media.

The cryptocurrency industry has withstood regulatory bans, political slams, criticism, scepticism, hacks, viruses and intense competition, surviving solely on the basis of innovation and market demand. The Chinese Bitcoin ban is the latest in a long story of things that were supposed to put an end to the whole cryptocurrency. But didn’t. And on surges the bitcoin price.

There will be many more events, and the price will most likely continue to rise and fall with a steady upward trend. Investors are delighted at rock bottom prices of their favourite cryptos, some of which have dropped by 50%, and will rise as Chinese investors find alternative ways to trade the cryptocurrencies. Once again, the industry has suffered a worst-case scenario and will likely emerge stronger than ever.

Volatility is not Weakness

Despite an incredible amount of volatility, the cryptocurrency industry as a whole is as strong as any (possibly stronger), and the idea that the work of millions of people building apps, frameworks, exchanges, platforms and other applications could simply be “shut down” by a regulatory ruling or an “electrical grid failure” is, at best, extremely ill-informed. In fact, bitcoin is proving that people might not actually need regulatory rulings, in the sense that the industry is thriving not in spite of a lack of interventionism, but possibly due to a lack of intervention.

It might be volatile, but that term has nothing to do with any form of weakness as people seem to believe. A system that survives shocks and gets stronger is far better than a system than gets destroyed by shocks and has to be bailed out, by any reasonable objective standards.

Some market observers have speculated that Chinese regulators will allow cryptocurrency exchanges to re-open once the government has measures in place to provide greater oversight. If it does, then it is likely that all-time highs will be again breached. Matt Roszak, the chairman of Washington-based Chamber of Digital Commerce and an investor in BTC China, said that this could happen by the end of the year.


Author: Daniel O’Keefe

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