Growing Interest In Bitcoin By PBOC Is A Positive Development
The Bitcoin market has been hit with a fair amount of panic selling over the past few days. Most of the sales stem forth from the news related to Chinese regulators scrutinising Bitcoin exchanges. The People’s Bank of China is indeed taking a closer look at Bitcoin trading platforms, but that does not necessarily mean bad things are happening. In fact, some experts feel this “closer inspection” of these exchanges is a good thing.
China’s Scrutiny of Bitcoin is Somewhat Positive
Contrary to what most people seem to believe right now, the ongoing “issues” in China are not a bad thing. With the Bitcoin price rising to a near all-time high over a week ago, now is an opportune time to look into the cryptocurrency world. This does not mean Bitcoin itself will be regulated, as that is virtually impossible. All a government can do is impose restrictions on the centralised exchange platforms, but it seems doubtful the PBOC plans to do so.
The low Bitcoin volatility of Bitcoin throughout 2016 has also created a sense of false security. The uptrend during the second half of last year seemed to indicate negative volatility was very far away, yet reality kicked in rather quickly during the first two weeks of 2017. One message by the Chinese central bank sends the Bitcoin price down a long and slippery slope, which indicates most traders are “weak hands”.
Granted, the majority of Bitcoin trading takes place on Chinese Bitcoin exchanges. That does not mean the same level of trading volume cannot be achieved without these centralised companies, though. Most traders have gotten accustomed to using companies such as BTCC, OKCoin, and Huobi for trading, even though they centralise the exchange of a decentralised currency. Unfortunately, there are very few reliable P2P trading platforms that are convenient to use by mainstream speculators and traders right now.
Moreover, it seems highly unlikely a lot of people flocked to Bitcoin as a way to circumvent Chinese capital outflow restrictions. China’s economy “lost” U$320bn in 2016, whereas the Bitcoin market cap is only US$13 bn. This does not take away some people may have bought Bitcoin and resold it to get their hands on foreign currency, though. In the grand scheme of things, it is highly unlikely Bitcoin is more than a drop on the boiling plate of Chinese capital outflows right now.
This latest piece of political involvement makes it very difficult to predict what will happen to the Bitcoin price. A very noticeable bearish trend has been established across exchanges worldwide, yet the losses are not as large as they could have been. That said, it is possible the price will continue to slip further during these “uncertain times”.
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