Regulations imposed on cryptocurrency in China are driving Bitcoin prices down. Is China's sudden and vigorous crackdown responsible for dropping Bitcoin prices?
itcoin is making a huge splash in China lately, or maybe it’s the other way around. Regulations imposed on cryptocurrency in the country is hampering Bitcoin prices as of late.
Bitcoin prices have been in a steady decline and reached its lowest point since May. Bitcoin is having a rough end to the year after losing $3000 in value in just a month – and it’s all thanks to China’s sudden and vigorous crackdown.
The overnight effect on the global crypto economy verifies China’s stronghold on cryptocurrencies and shows that Bitcoin is dominated by Chinese money.
According to an article on Quartz:
“China is home to the world’s largest bitcoin miners, thanks to abundant and cheap electricity, and at one time the country accounted for 95% of the volume traded in global markets.”
Research from Datalight, a cryptocurrency and blockchain analytics firm, revealed that 74% of Bitcoin nodes come from 10 countries. China comes in 5th with 411 nodes, while the US comes in first with 2625 nodes.
Although China doesn’t have the most nodes, China is in the lead with the most mining pools.
Bitcoin was created in 2008, but its popularity didn’t take off in China until 2013 when the BTC China exchange took over the Japan based exchange, MT. Gox. Businesses started to accept Bitcoin that year as well, including the Chinese search giant, Baidu. This led China to becoming the home for Bitcoin miners with a long line of investors and miners.
One theory to why Bitcoin became so popular in China stemmed from the 2013, 6.6 magnitude earthquake in Lushan county. The Director of a Chinese charity One Foundation asked for donations including Bitcoins. 50 Bitcoins were donated and subsequently made national news in China, creating the buzz that made China one of the top countries with Bitcoin.
This was the start of the Bitcoin boom in China. On top of that, cryptocurrency was a natural go-to commodity for Chinese investors. Eric Gao, the brain behind the CN Ledger Twitter account, believes that:
“There are not many good investment choices for common people in China. Many people worry about inflation and lots of people feel insecure about their financial status...They buy it simply because they believe it will appreciate in value.”
The 2013 Bitcoin boom also attracted the government’s attention. When Bitcoin surged to over $1000 for the first time, the central banks of China tried to denounce Bitcoin as a currency.
The attempt to control Bitcoin only showed that the country had no real control over it, unlike the tight grip they have over the Renminbi. In 2017, China forced trading platforms to close down and banned ICOs.
More recently, government attitudes are changing for the better. In late October, China’s president, Xi JinPing, embraced blockchain technology and called for advancement into the technology.
The news caused Bitcoin prices to surge and experts are saying it could be a new chapter for China. But following this announcement, government crackdowns on bitcoin also forced its value to drop significantly.
China’s tip toeing back and forth over regulations may drive prices, but it’s also bitcoin’s biggest downfall.