How big is this China news, really?
China's Central Bank announced early last week that they would be officially banning all ICOs.
More about it can be read here:
https://steemit.com/cryptocurrency/@jrcornel/china-bans-ico-s-is-this-good-news-or-bad-news
On the surface this sounded like pretty bad news and the markets reacted accordingly.
Bitcoin shed roughly 20% from it's all time highs of around $5,000 per coin down to where it sits now around $4,000 per coin.
The altcoin market took the news even harder with many coins (including Steem) shedding roughly 30%-40% since the news came out.
There was one section of the release that seemed to be the most damaging, the part about potentially shutting down the off-ramps from cryptocurrency to fiat.
However, things started to recover within the next couple days as the virtual coin market rallied pretty significantly off the lows.
Then, just when things were looking like they weren't going to be so bad, more news out of China is dragging down markets again.
This time it is in the form of a rumor.
The rumor is that China is also going to be shutting down all the local cryptocurrency exchanges.
This hasn't been confirmed by the Chinese Central Bank as of yet, but as the days go by, more and more sources "in the know" are saying that exchanges are indeed likely to be shut down in the very near future.
That leads me to this question...
How big of a deal is all of this?
Like I mentioned in my previous post on the topic, I think regulating the ICO market is great news for the industry. These things are sapping away investment dollars that could be going to legitimate projects.
Not saying that all ICOs are scams, but a large portion of them are and their numbers only seemed to be increasing.
However, the latest news that cryptocurrency exchanges are likely to be shut down in China is an entirely different animal as that would greatly affect Bitcoin, Ether, and many of the other legitimate cryptocurrency projects.
In order to gain some perspective I did some reading to see what others in the industry might think about all of this.
Charles Hayter, the CEO and founder of digital currency comparison website Crypto Compare had this to say regarding all the news:
"With China nothing is ever certain and a lot is left to be desired in terms of translation and interpretation. Rumors are that the Chinese are looking to ban bitcoin again and ring-fence their fiat yuan from the crytpo world. The fears of capital outflows as well as money laundering are causing the Chinese State to ratchet up the rhetoric."
Interesting, but here is the big take away...
This news out of China shouldn't affect the markets too deeply as China "isn't that important."
What did he mean by that statement?
Well, currently China accounts for less than 20% of the world's cryptocurrency volumes. So, yes they are large, but they are by no means the entire market.
Japan, the US, and Korea are more than enough to handle and sustain healthy Bitcoin/cryptocurrency volumes were China to completely go away.
Which, even worst case scenario, China isn't going to completely go away. It looks like even if the current exchanges are to be shut down, the OTC Bitcoin market will remain open.
Which means there will still be money from China going into Bitcoin.
For the time being this latest news means uncertainty in China but for the rest of the world, it is business as usual.
What do you guys think, how big is this news out of China?
Is this the beginning of other countries stepping in and banning exchanges as well?
Will this affect Steem and Steemit?
Let me know in the comments section below.
Stay informed my friends.
Sources:
Image Sources:
https://www.equities.com/news/is-china-preparing-it-s-own-bitcoin-alternative
https://www.readhouse.net/articles/165201366/
Follow me: @jrcornel
Great article, as always, thanks a bunch for it all!
I guess this situation arising underlines once more the importance of BitShares as a fully decentralized exchange! This might bring more and more interested minds and investors into that realm, we would all gain from such a move...
Namaste :)
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image by Cryptocompare.com
If they indeed end up banning exchanges trading will just move to the black market like everything else that's "banned" in China. It will give a boost to decentralized exchanges such as Bitsquare, Bitshares and OpenLedger. The genie is out of the bottle, governments should concentrate on beating their opponents at this race rather than creating obstacles that can only leave themselves behind
There is also a lot going in the Ethereum space. 0x, Oasisdex.com and Etherdelta.io are innovative projects with a lot of potential.
To me it doesn't look like this is going to be a permanent thing honestly.
Today I came across a great article that goes into detail about NEO's parent company OnChain and what they have been doing under the radar. As you probably know, NEO was hit hard because of the ICO ban, seeing as many people saw value in it because it was an ICO platform.
After reading the article, and seeing how many things are going on under the radar, I am strengthened in my belief that not only will this China FUD be temporary, but NEO is very likely to come out on top from all of this. OnChain is developing a blockchain for a Chinese province government as we speak according to the article. If that doesn't say something.. Seriously, go have a look. It may be NEO and OnChain specific but it does put things into a certain perspective. I would say there are good odds that NEO is going to end up being one of the few authorized ICO platforms, perhaps even getting exclusive rights, as is not uncommon in China. So I definitely think there is a good chance this situation is only temporary.
I wrote a little about it and linked it in my post here
I was wondering why Steem crept back down so quick, we were just getting comfy back above $1.50... :-(
Thanks so much for sharing the fact that China is only 20% of the total crypto market. To be honest, I thought it was more and found the idea of the Chinese exchanges shutting down to be terrifying.
In the end, as long as the long-term vision remains true and viable, I can feel comfortable despite the short term dips.
Yeah bitcoin is currently dominating the whole market in USD.
Yes it is a huge blow for the short term, if true. Even the Wallstreet Journal is reporting the closure of the exchanges. Even though we have seen no formal comms yet. Anyway look at it on the bright side: This is even more airtime for cryptos if the news is true. And with regards to Chinese trading: fewer pumps and dumps now ;)
Didnt expect this to happen though, with huge exchanges and mining farms, China was at the top of the list for cryptos. Now it would certainly loose this position to countries like south Korea and Japan.
As usual, enjoyed your article, cheers.
Its all about Communist party control. China has opened up a lot but the government is still run by the Communist party with it's ideals of control. Just like banning Google or Facebook, the Communist party sees crypto as a threat to their rule so they are trying to block it. Yes, there are a lot of bad ICOs out there but the market will work it out as people become more educated. I feel that the Chinese government is seizing the opportunity now with all the ICO issues to take a hard line on Bitcoin and other established cryptos just to build a firewall around the Yuan. The Yuan is already a government pegged currency just like the Rubbel was during the Soviet era. The Yuan is much more susceptible to being undermined by Bitcoin than the US dollar which is recognized and accepted all over the world and trades freely against other currencies. Albeit the fed controls the money supply and interest rates so they do exert a lot of control but they can't just peg a price like the Communist party. I don't see China letting up on this anytime soon. Perhaps they are secretly working on their own Communist backed crypto currency and they are stalling for time to prepare. Just a thought!
I've been saying the crypto world should turn its back on China before China has the chance to screw up crypto currency for awhile now. Their business culture fosters copy-cats, corruption and state control. They prefer saftey over risk and overall lack innovation. We should welcome India, Russia and Brazil with open arms. China is a lemming parade.
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Completely agree. I've just been enjoying the sale.
good post
Even if it occurs, this sanction will not stop BTC.