How China Captured the Global Bitcoin Market (Op-Ed)
The story of Bitcoin is a cloudy but mostly American fairy tale about a global currency that doesn’t even really exist to many since it lives only on one’s computer.
The story of Bitcoin is a cloudy but mostly American fairy tale about a global currency that doesn’t even really exist to many since it lives only on one’s computer. While no one knows who Satoshi Nakamoto is, it is believed that Satoshi primarily spoke and worked on Bitcoin in English, resided on the West coast, and refined his protocol with the late Hal Finney over six years ago.
Yet just 2 years ago, China began to get a taste of the wonders of Bitcoin, and it blew the roof off of the small, but growing market, driving prices to over US$1,100 within a season.
China’s love-hate relationship
Americans had never had that level of fervor for Bitcoin as a new currency/investment because Americans have been so privileged as to have the global reserve currency as their national currency. Bitcoin is just a cute speculative investment for Americans. A digital toy to play with, something to day trade with friends.
For anyone outside of the U.S., it can represent much, much more. The average Chinese investor quickly saw a decentralized currency not manipulated by the People`s Bank of China as a wonderful thing and acted on it. The average American should be just as intrigued by an innovative, sound money-based currency that appreciates over time, but being spoiled has its demerits, too.
After a torrid second half of 2013, the Chinese government got wind of the financial shift in the markets and countered by making bitcoin persona non grata when it came to banking and regulatory authority. Banks could not hold bitcoin or open any business or personal accounts related to the currency. Bitcoin rallies and conferences were censored by the totalitarian state to keep a lid on Bitcoin's publicity and level of interest nationwide.
Coupled with the Mt. Gox collapse, this started a financial market crash that only now bitcoin is starting to recover from. Even as the United States of America slowly turns into The Police States of America, China is way ahead of The West when it comes to restricting freedoms of its people.
Yet, in 2014, the state took a step back. According to highly successful Chinese miners covered by Vice’s Motherboard, who control a large chunk of the global Bitcoin mining market, state restrictions on Bitcoin either eased or were navigated around. The state no longer saw Bitcoin as a decentralized threat upon the national currency, the Yuan, but just an online commodity to be traded. Throughout 2014 until the current day, China has increased and maintained a massive market share in Bitcoin.
According to reports from Western financial powerhouse Goldman Sachs, around 80% of all Bitcoin was traded in Chinese Yuan at the end of 2014. China has maintained more than 50% of the global Bitcoin market ever since Q4 of 2013 when Bitcoin prices exploded almost overnight.
With this chart, you can see that Bitcoin was almost exclusively a US Dollar investment from the beginning, but the US Dollar has faded fast since China got on board with the digital currency concept.
Is this level of Chinese mining and Yuan exchange currency dominance a good thing for Bitcoin?
You can look at it from two different perspectives. Having one billion people potentially investing in Bitcoin could accelerate its global adoption, influencing the rest of the world to jump on the Bitcoin bandwagon. Or not so good, since China is a well-established and highly restrictive totalitarian regime that makes the growing "Police State" in the U.S. look like a Cub Scout meeting.
You can see a potential downside since if the People’s Bank of China, which is directly run and managed by the Chinese government, has dropped the hammer on Bitcoin investors and owners before, they can do it again.
At least in the U.S., the government has carried a "laissez-faire" approach to Bitcoin due to corporate business interest and a need for tax revenue. American greed and fascism have gone a long way in protecting Bitcoin in the West. Also, American legislation has defended Bitcoin well. The Citizens United Case has made the legal precedent of money as a form of speech and information, which has huge ramifications for Bitcoin.
If the U.S. Government wants to ban Bitcoin, they risk creating a solid legal precedent that Bitcoin is money and is a legal form of information and speech in accordance with Constitutional law and current legal constructs. That road is a very dangerous one to travel and well-funded Bitcoin venture capitalists could win this battle, something that the Americans powers that be are aware of.
Plus, bitcoin is used in religious tithings as donations and there are many American laws protecting the freedom of religion. Furthermore, politicians also have little incentive to attack it, as they can now legally get donations in bitcoin via a judgment by the Federal Election Commission (FEC). So why close a potential long-term stream of income? Politicians always love getting bought off so bitcoin is here to stay as far as America is concerned, while Bitcoin’s free market capitalism isn’t going anywhere soon.
Banks around the world are now building their own blockchains and western venture capitalists are investing heavily in “the future of money.” Slowly and quietly, Bitcoin is not only changing how the world does business, but also how China does mining. The Bitcoin currency investment and mining have to come from somewhere, and that place is currently China.
The West sees the business potential, but the Chinese see the currency’s potential. ZeroHedge has gone over how Bitcoin is a great way to maneuver around Chinese state capital controls, allowing well-heeled Chinese to invest in valuable foreign markets like American real estate.
As states look for more and more control over the failing global financial markets, Bitcoin offers too many answers to these problems for the consumer. As long as people want to be free to invest worldwide and don’t want to be controlled by pick-a-government-regime, Bitcoin will be a viable path to economic freedom.
Right now, the Chinese see Bitcoin’s decentralized value much more clearly, and it is the Western markets looking to catch up in the race to the world’s much more advanced economic future.