An unexpected panic hit the Bitcoin markets yesterday as the bears made their presence known. After reports of PBOC holding a closed door meeting supposedly discussing AML issues with Bitcoin exchanges, the price dropped 5% as traders shorted the market.

The PBOC recently conducted a closed-door meeting regarding further regulation of Chinese Bitcoin exchanges. They released a statement regarding their meeting which described the usual guidelines for exhcanges. They shouldn’t violate AML / KYC laws, shouldn’t offer illegal margin trading service, and should charge fees. However, one interesting fact to take notice of, is how this was the first PR released by PBOC which contained a threat.

If the exchanges violated the above requirements, and if the circumstances were serious, the inspection team may ask the relevant departments to close down the exchange according to law.

The goal of Chinese regulators is to prevent the movement of money out of of the country, by restricting the on ramps available for residents the government can gain some sort of control over the finances. As more regulations and licenses will become required of Bitcoin exchanges, it will get harder and harder for them to stay in business. As a result the fewer exchanges there are, the easier it is to curb capital outflow.

The market’s reaction to the rumors couldn’t be farther from unexpected, the price flash crashed 5% as bloomberg picked up on the news. Many traders expressed their frustration with Bloomberg by picking up the news and updating the chart after the fact, possibly contributing to market manipulation.

The image below shows how the article was posted at 1:51AM, while at the time bitcoin’s price hasn’t dropped yet (according to the bitcoinwisdom screenshot). Taking a look at the image used in the article it was a snapshot at 2:00AM, a full 9 minutes after the article was posted. Take a look for yourself:

Traders are concerned how Bitcoin barely receives any coverage when the price goes up, yet when any news regarding regulation, countries banning bitcoin, exchanges shutting down, or simply bitcoin price dips, cause the media to explode with stories.

While the community’s suspicions may be true, the increase in Bitcoin coverage could be a coincidence. We cannot deny the fact that the media definitely covered Bitcoin as it was approaching a new ATH. As interest in Bitcoin increased, more mainstream media picked up on hype so they could profit from the extra clicks. It could be the case that the media is watching Bitcoin closely for any potential new developments while readers’ interest is still ripe. Regardless of media coverage, the price has swiftly recovered since the announcement and is rising even further than before.

In fact, it seems that yesterdays dip was simply a beartrap. After dipping a whole $45 within 6 hours, the price is back trading at yesterday’s peak which was at $1070. It took about 20 hours, but after the market realized that the PBOC meeting should not be a cause for concern the bulls resumed their rally.

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