Are Bitcoin Traders Overreacting to China's Crackdown?

Are Bitcoin Traders Overreacting to China's Crackdown?Over the last 24 hours, bitcoin’s value has taken another hit, falling below $500 before rebounding somewhat — mostly because of China’s crackdown on the cryptocurrency.
But the latest news to cause a sell-off was not exactly a surprise, but a logical progression based on China’s ongoing efforts to tightly regulate the flow of its official currency.
Bitcoin’s popularity, and that of other cryptos, such as litecoin, is being fueled increasingly by various exchanges and payment processors outside of China.
However, BTC China is that country’s, and the world’s, largest bitcoin exchange.
So it was a market-moving announcement when BTC China said Wednesday that it could no longer accept deposits in Renminbi (RMB, the Chinese currency) because of regulatory issues.
China’s biggest fear is an ongoing exodus of its fiat currency via bitcoin trading.
Traders can, for example, buy 10,000 yuan worth of bitcoins on BTC China, and then easily transfer those bitcoins to a virtual wallet outside of the country. They can then sell those bitcoins in another currency in a different country.
Earlier this month, the People’s Bank of China told financial institutions not to accept bitcoins as legal tender.
Earlier this week, it was widely reported that China was banning third-party payment processors, the sites that feed real money in and out of the exchanges, from doing any bitcoin-related business.
But no official statement has been issued by the People’s Bank of China or any of the third-party payment processor regarding this supposed ban.
“Right now we, as a bitcoin exchange, have suspended taking all deposits in RMB,” Bobby Lee, CEO of BTC China,told CoinDesk.com “But, on the withdrawal side, people still have the ability to withdraw RMB. There should be no worries – all the money is safe, secure and is all accounted for.”
Customers are also still able to deposit and withdraw bitcoins from BTC China.

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