Bitcoin’s price recorded a minor correction yesterday, dropping from US$4,010 to US$3,850 after showing early signs of recovery this past week.
Upon the finalization of the closure of Chinese bitcoin exchanges and trading platforms, bitcoin’s price rebounded quickly from US$2,900 to US$3,800. Traders bought the dip and institutional investors including JPMorgan engaged in bitcoin trading through regulated channels such as the Bitcoin XBT via Nasdaq Nordic. This caused the price to surpass the US$4,000 mark.
As bitcoin’s price continued to recover, prominent financial analysts and traders in the cryptocurrency sector including Max Keiser and WhalePanda expressed their optimism toward the short-term trend. Keiser reaffirmed his interim bitcoin price target of US$10,000.
In the short term, bitcoin’s price could stumble and likely endure additional minor corrections if the Chinese government were to impose strict regulations and restrictions on local bitcoin mining operators. ViaBTC CEO Haipo Yang stated:
“Technically, China can’t ban bitcoin traffic, we have our own sync network. But if the Chinese government says mining is illegal, we are fucked.”
If the Chinese government intends to release a state-owned national digital currency as suggested by the People’s Bank of China (PBoC) and Central University of Finance and Economics researcher Huang Zhen, it could very likely ban every aspect of bitcoin usage in the country. In an interview with PBoC’s own finance news publication, Zhen explained why the Chinese central bank perceives bitcoin as a threat.
“Cryptocurrencies and other virtual currencies attempt to challenge the sovereign state’s right to issue currency, requiring the nationalization of currency issuance. China has a clear understanding of digital forms of money, and is actively engaging in relevant work. The central bank has set up a research group and a digital money research institute to explore the digitization of sovereign money. After this round of virtual money markets supervision, we expect under the auspices of the Chinese central bank to launch our own sovereign digital currency as soon as possible to help maintain China’s leadership in the development of global digital finance,” Zhen stated.
It remains uncertain whether Zhen’s view is shared by the PBoC and the rest of the nation’s financial regulators. Considering Zhen’s involvement with the regulators and his interview with PBoC’s news publication, it is likely that the Chinese central bank is indeed planning to release its own digital currency. If so, acknowledging the Chinese government’s unpredictable nature, the PBoC could attempt to ban every aspect of bitcoin in the near future, including bitcoin mining and OTC trading.
Such events could cause several minor corrections in the short term. However, in the long term, the emergence of multi-billion dollar Japanese conglomerates in the global bitcoin mining industry and the strengthening South Korean cryptocurrency trading volume will even out the exit of Chinese traders. Some analysts suspect that the bans could even be positive for bitcoin because the elimination of the Chinese bitcoin market will create a more balanced and distributed global bitcoin industry.