Bitcoin Price Falls 8% as Chinese Government Plans Bitcoin Cap
China is Bitcoin’s epicenter, and this leveling out of Bitcoin values may be just the beginning, as China has found this economic loophole and is beginning to plug this digital gap.
Bitcoin price has been on somewhat of a roller coaster ride over the past week. On Oct. 28, Bitcoin was trading at around $690 before taking off last Saturday, reaching $720 according to Bitcoin Average. Correspondingly on Oct. 31, Bitcoin fell below $700, only to rebound strongly yesterday, swelling to over $745.
Then the bottom fell out, as a free fall began, bringing Bitcoin price to the position it was at one week ago, losing 8% of its value. What is the cause of these fluctuations? China is Bitcoin’s epicenter and this leveling out of Bitcoin values may just be the beginning, as China has discovered this economic loophole and is beginning to plug this digital gap, potentially creating a market cap for Bitcoin speculators in the world’s number one Bitcoin market.
According to information obtained from ZeroHedge and Bloomberg Business, Chinese officials are considering introducing policies, including restricting domestic Bitcoin exchanges from moving the cryptocurrency to platforms outside the nation and imposing quotas on the amount of Bitcoins that can be sent abroad. This has largely been done to counter the rampant Chinese Yuan devaluations that have plagued 2016.
"Bitcoin has surged 21% since the end of September as the yuan’s decline accelerated, boosting speculation Chinese investors were buying the cryptocurrency as a hedge against further weakness,” according to Bloomberg Business.
Furthermore, Bloomberg sources state that:
“With the risk of quicker depreciation rising along with the odds of an impending U.S. interest-rate hike, policy makers are seeking to restrict outflow channels.”
It doesn’t take much to see that when the value of the Yuan, versus the U.S. Dollar, fall, Bitcoin transactions and price correspondingly rise. It appears that the People’s Bank of China and government officials have caught up and are beginning to implement countermeasures, although nothing has been enacted as of yet.
The Chinese economy has slowed from previously double-digit annual GDP growth, to its current position of which is half of that, with the government responding with Chinese Yuan currency devaluations and capital controls. Bitcoin has been seen as an effective counter by those who are looking to protect their wealth in the region, either traveling to Macau to purchase Bitcoin or using other offshore means, sometimes through Bitcoin exchanges.
Bitcoin price has since tripled over the last fourteen months, reflecting the economic policy changes in China to deal with the economic slowdown as well as the word-of-mouth about Bitcoin being an economic “safe haven.”