Recent Developments in China May Further Strengthen Bitcoin, Reduce Volatility


The recent developments in the Chinese Bitcoin sector forced many cryptocurrency exchanges to change their practices. These changes were put into effect after margin and leveraged bitcoin trading options came under the scanner of government agencies following huge reported losses among customers.

The price of Bitcoin, a popular cryptocurrency experienced a sudden fall earlier this month. The fall impacted investors across the world, but the ones in China suffered the most. Losses incurred by investors was due to the inability to log into their respective accounts and execute stop-loss trades on time. Upon receiving notifications about the investors’ plight, People’s Bank of China decided to inspect the Bitcoin platforms for unfair practices.

According to reports, the Chinese central bank had discussions with all leading Bitcoin exchanges and also issued a statement clarifying the stance of Bitcoin in country’s monetary system. The People’s Bank of China’s statement reiterated that Bitcoin is a virtual asset and not currency.

Following the central bank’s inspections, few leading Chinese Bitcoin exchanges have made changes to their trade offering. Few platforms like Huobi BTCC have completely stopped offering margin trading. OKCoin, another cryptocurrency exchange has reduced the leverage to 1x.

These new changes are expected to reduce Bitcoin trade volumes in the Chinese market, in turn reducing the dependency of Bitcoin price fluctuation on Chinese trading practices. All these factors will ultimately result in reduced volatility, which is a good thing for the cryptocurrency. The cryptocurrency platforms have reportedly suspended their existing loans and borrowing services for trading. The new developments follow the advice received from People’s Bank of China.

Contrary to earlier belief, the Chinese central bank is not cracking down on the digital currency. Instead, the authorities are attempting to implement measures to protect the interests of domestic investors. Continued effort on the central bank’s part will help China further strengthen its foothold in the Bitcoin, making it as good as any other currency for investment and transaction purposes.

Ref: SCMP | 8BTC | Image: NewsBTC

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