If there was ever any doubt about China’s critical role in Bitcoin then yesterday it was crushed. The People’s Bank of China (PBoC) have, for the second time in a month, created enormous volatility in the Bitcoin market after they intervened in the operations of the top Chinese exchanges. The last 7 days of rallying was wiped out in its entirety following an announcement by OKCoin and Huobi.com that Bitcoin withdrawals would cease for at least a 30 day period.
The announcement comes after the Chinese central bank applied pressure on these Bitcoin exchanges to clean up their act; demanding that better regulatory checks were put in place to help enforce capital controls and money laundering legislation. While such regulation was not entirely unexpected following earlier events in January, the shock was enough to send the Bitcoin price plummeting by over 10% before making a small recovery.
The PBoC’s intervention has cast further fear over China’s ability to crush the price of Bitcoin through crippling regulation. Bitcoin maximalists would argue that the cryptocurrency’s value lies in its free market principles and increased levels of privacy; on the other hand, many advocates of Bitcoin consider this move to be a positive step in legitimising Bitcoin and helping to reduce price volatility through a solid regulatory foundation. Those interested in a conspiracy may theorise that insider trading is at play. Should China perceive Bitcoin as a the next global reserve currency, reducing the price and purchasing stacks of Bitcoin “while it’s cheap” may be a shrewd (yet highly illegal) move by the Chinese government.
Despite some negative shocks to the price of Bitcoin, the currency is up by well over 150% year on year and even this latest decline has only put Bitcoin back by 8 days. With the possible approval of the first Bitcoin ETF coming up in March, who knows what will happen to the price in the weeks ahead.