China Struggles to Lay Killing Blow to Bitcoin, Currency Thrives
Despite all of China’s efforts, Bitcoin continues to be a force to be reckoned with.
China became the first country to take a hardline approach to ICOs, then moved on to Bitcoin and the exchanges that trade the digital currency. Despite these bold and brazen efforts, Bitcoin’s price is higher than ever, and the currency continues to be a factor in China. Where there’s a will there’s a way, and Chinese investors are still managing to trade Bitcoin and buy into controversial ICOs.
Fear of drop
The initial news of China’s take down of Bitcoin, which was timed with Jamie Dimon’s slur on Bitcoin, caused the price to take a dive. As the price dropped from $5,000 to $3,000 on the news, the fear was that further exclusion of a major Bitcoin player, like China, would erase Bitcoin’s price gains this year. However, this has not been the case at all.
Instead of a total shutdown, what has happened is that resourceful Chinese traders have adjusted their methods, switching to a private over-the-counter market.
Over the counter Bitcoin trading has risen from about 5% at the beginning of September, before exchanges were shuttered, to about 20% a month later. This is according to data cited in a report by the National Committee of Experts on Internet Financial Security, a government-backed research group.
Change in tactics
Traders have had to move with the times to stay relevant in the Bitcoin market, which has also seen a change in messaging app to effect these peer-to-peer trades.
State controlled messaging app WeChat has seen an exodus of Bitcoin related chat as the more neutral Telegram has picked up the slack. This is where the Chinese population has found aid in making over the counter trades.
There are still plenty of issues for miners to overcome in China due to new regulations. Many have fled to China’s hinterland in Gansu and Inner Mongolia, where cheap electricity can power massive rigs.
This new peer-to-peer market, however, is still young, and not liquid enough to allow these miners to set up the sale of their newly minted coins. According to Thomas Glucksman, head of marketing for Gatecoin:
“There are a lot of questions about the future of the Chinese miners, given that they still need to pay for staff and operations in renminbi. It’s either a case of migrating their operations or facilitating renminbi cash-out through the over the counter market.”