While the future of the Chinese Bitcoin and cryptocurrency markets remain uncertain, the Chinese government will no longer be able to manipulate the market and negatively impact the Bitcoin price.
Earlier today, on October 16, LIU Post in New York professor and chair of the department of economics Panos Mourdoukoutas suggested the possibility of the Chinese market bringing the price of Bitcoin down, below the $5,000 mark. He wrote:
“Prices could head below $5000 again this week, if the conservative side of the CPC gets the upper hand of the convention this week. While it’s anyone’s guess which way things will turn, one thing is clear: Bitcoin traders are in for a rough ride.”
But, China had already banned trading activities around Bitcoin and cryptocurrencies. As Chamath Palihapitiya, the prominent venture capitalist and owner of the Golden State Warriors stated, governments are limited in what they can control in regards to Bitcoin and public blockchain networks.
“What countries can constrain today is how it [bitcoin] is effectively traded but it cannot be controlled. It is a fundamentally distributed system that exists peer to peer,” said Palihapitiya.
The Chinese government already cracked down on Bitcoin and cryptocurrencies by banning exchanges and restricting trading. As a result, the Chinese Bitcoin exchange market’s trading volume declined significantly, only accounting for around 1 percent of global Bitcoin trades.
China had already banned Bitcoin and cryptocurrencies in September and contrary to the statement of Mourdoukoutas, China will no longer negatively impact the Bitcoin price. The global Bitcoin exchange market has already restructured, as trading volumes moved from China to more established, regulated, and efficient markets such as Japan and South Korea.
The last approach the Chinese government could take to restrict Bitcoin is to prohibit the usage of over-the-counter (OTC) markets such as LocalBitcoins in trading Bitcoin. But, even then, trading volumes OTC markets in China only account for tens of millions of dollars worth of Bitcoin trades on a weekly basis, which is a small fraction of global Bitcoin trading volume in contrast to leading exchanges such as Bithumb which process hundreds of millions of dollars in trades on a daily basis.
The Chinese Bitcoin market is virtually non-existent; its trading volumes have fallen to a point wherein the market could not possibly impact the global Bitcoin market in any way. In the upcoming months, depending on the state of the Chinese Bitcoin market, China could positively impact the price of Bitcoin by resuming cryptocurrency trading. But, it will not lead to a decline in the price of Bitcoin, as the Bitcoin market has already recovered from the ban imposed by the Chinese government.
Major milestone: #bitcoin market cap surpasses that of Goldman Sachs at $95 billion ?
Next: $100 billion & eventually $350 billion JPMorgan pic.twitter.com/3H93KtwBaP
— Joseph Young (@iamjosephyoung) October 13, 2017
In the mid-term, as the South Korean and Japanese markets strengthen, and more institutional investors emerge within the global cryptocurrency market, the price of Bitcoin will continue to increase at a rapid rate. In the past four days, the price of Bitcoin increased from $4,500 to $5,620, recording a weekly gain of $1,120.
Image Credit: Thomas Depenbusch, For commercial use