Bitcoin value drops as China allegedly closes digital exchanges

Chelsea West
September 12, 2017

China accounts for about 23 per cent of bitcoin trades and is also home to numerous world's biggest bitcoin miners, who confirm transactions in the digital currency.

BTC China, the second-largest exchange, has responded to the crackdown with its own statement.

A notice from the Banking Regulatory Committee led by the People's Bank of China announced on September 4 an immediate ban on ICOs. While existing users will likely still trade, according to Zhou Shuoji, a founding partner at FBG Capital interviewed by Bloomberg, it will make it more hard for new users to start trading Bitcoin-thereby limiting Bitcoin's potential growth.

The clampdown is seen as part of China's efforts to regain greater control over its own currency, the yuan, after the surge in bitcoin's price past year was attributed to eager Chinese buyers looking to sell yuan, fearing its collapse. "This will definitely slow the development of cryptocurrencies in China".

Although bitcoin is being traded at around $4,000 in China, almost $200 lower than the U.S. market, Chinese exchanges have demonstrated low trading rates for the bitcoin-to-Chinese yuan pair throughout 2017.

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There are conflicting information regarding China's alleged order for virtual currency exchanges to shut down, as several Chinese exchanges such as Huobi and Okcoin have said they haven't any orders from the government. "Just 15 percent of global bitcoin trade against Japan, Korea, and the United States of America, which equal to 80 percent", said Kikvadze.

The exchange ban is unlikely to have a major impact on the prices of cryptocurrencies because venues outside China will continue trading, according to FBG Capital's Zhou.

The country's role in the bitcoin market had already started shrinking in recent months as the authorities tightened regulation. With China being such a huge country, and one of the biggest Bitcoin miners in the world, it's no wonder that the price dropped significantly.

The bigger risk for global bitcoin traders may be the massive rally in prices, according to McFarland. Buying Bitcoin was a way to bypass those rules.

Other reports by TheSundaySentinel

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