As People’s Bank of China Sends Bitcoin Spiralling Down the Centralization Era Comes for Bitcoin
It would be naive to miss out the subtleness in the press releases of PBOC which sent Bitcoin spiraling down twice in January.
China is at the center of Bitcoin as it should be. After all, most of the world’s Bitcoin is mined and traded there. However of late, the Chinese Bitcoin scene has a new persona on the stage and that is the country’s almighty central bank, the People’s Bank of China hereinafter PBOC.
The PBOC has of late issued two statements, one on Jan. 11, 2017 and the other on Jan. 6, 2017 both of which have sent Bitcoin falling from the early January highs the currency had achieved above the $1,000 mark. So what is prompting the PBOC to take an interest in Bitcoin and what is the likely outcome of this interventionist approach?
PBOC has a point
The last fall in Bitcoin did more than just terrify their investors, it actually hurt. In an article in the South China Morning Post, the author Xie Yu cites the case of Ding Wen, a 34-year old man who lost 40 percent of his investment in Bitcoin as he was unable to log into his Huobi account.
Ding Wen was using leveraged betting to invest in Bitcoin. As Xie Yu writes:
“Now speculation, derivative products, leveraged betting and program trading appear to be spreading in the largely unregulated Bitcoin market. Such practices are thought to be responsible for pushing up the price of Bitcoin by more than 260 percent since early 2016.”
That is not all. China Daily also cited a Bitcoin trader Ma Yuanchuan who also lamented:
“Sometimes platforms suspend trading when prices plunge. For investors, this could mean a significant loss if they cannot sell and withdraw immediately.”
Let us be honest here: if the PBOC has found a reason to investigate these exchanges, it is because of the laxity on their part. People not being able to log into their accounts to execute trades is a serious lapse. However, now that they have the opportunity the PBOC can also serve their other purpose.
A Chinese ‘custodian’ of Bitcoin
SCMP quoted The China Securities Journal, which is sponsored by China’s official news agency Xinhua, “Regulators have noticed that some Bitcoin platforms crashed during the recent market volatilities, causing some investors, particularly those trading with leverage tools, to bear huge losses because they were unable to log on to the website during the sell off.”
The newspaper further added that there is a discussion among Chinese regulators and industry insiders about improving