Chinese Authorities Deliver Another Blow To Bitcoin Value
When China sneezes, the Bitcoin system catches a cold so to speak. It may not be as far reaching as America’s influence on global economic systems but it is nevertheless relevant for people investing in Bitcoins. The community has seen how even the slightest Bitcoin scare in China drives down the prices almost immediately. And there is no doubt that this played some role in Bitcoin’s loss of value of around $100 today.
New Bitcoin Obstacle From China
So why are Bitcoiners scrambling today? Unconfirmed reports have it that China’s Central Bank has banned third party payment companies from facilitating money transfers to Bitcoin exchanges. The news did not leak from these third party payment companies but from sources close to China’s central bank which have made many Bitcoiners take it more seriously.
A little over a week ago there was another major Bitcoin scare that brought up the possibility of Bitcoin falling below $500 by end 2013. Many blamed it on China’s announcement that financial institutions were banned from having any involvement in transactions relating to Bitcoin. It was said to be just one step short of banning Bitcoin.
The Chinese government tried to brush off speculation about banning Bitcoin saying that Bitcoin exchanges were legal and people were allowed to trade in Bitcoins. However, distrust has creeped in yet again as the recent move makes it difficult for Chinese citizens to continue with their Bitcoin activities. Whether it is the Chinese government’s first steps in regulating digital currencies or banning it is anybody’s guess.
Deposits To Exchanges Blocked
Bitcoin exchanges make use of the services offered by third party payment gateways. In this way a person can deposit funds into their account with an exchange. These funds can then be used to buy Bitcoins. When Bitcoins are sold, the user can then withdraw the funds from their exchange account through several ways, including a third party payment gateway.
If China’s move to ban third party payment companies from doing business with Bitcoin exchanges is true, then people will not be able to deposit funds into Bitcoin exchange accounts. This means new Bitcoin purchases are blocked. However, there is no need for panic yet. Any person selling their Bitcoins can still withdraw the funds from the sale.
Just how far these moves will go remains to be seen. And there is widespread chatter about the innovative options that Bitcoin exchanges will bring about to allow trading to continue unimpeded even though third party payment options may fall away.
Impact on Bitcoin Value
For those outside China the bigger concern is that these regulations have an adverse effect on the Bitcoin price of the day. China is the largest player in Bitcoin and any slightest hint of regulation has a very rapid effect on the price. Whether it was this hype that caused today’s drop in Bitcoin price cannot be conclusively validated.
Whatever the reasons, and whatever the role of China, it seems that even the chatter from the Winklevoss twins could not undo it. The Winklevoss twins are said to hold the largest number of Bitcoins amongst themselves, reported to be as much as 120,000 Bitcoins. Just this weekend, Cameron Winklevoss yet again affirmed his belief on Reddit that Bitcoin will reach the $40,000 mark.
But this does not seem to have been enough to counteract whatever forces that drove down the Bitcoin price today. Tomorrow is another day and in the Bitcoin game, a highly volatile game at that, Bitcoin could sky rocket in price once again.