Last updated on March 17th, 2014 at 08:06 pm
The most recent bitcoin boom was driven by Chinese investment, with people from the country buying up more of it than the rest of the world put together just a few weeks ago. Today though, that situation is very different, as following increased regulations by the Chinese government making trading the digital currency difficult, the value of bitcoins is crashing and the number of people buying within China has shrivelled from a torrent to a trickling brook.
It all started a couple of weeks ago when the Chinese government banned its financial institutions from dealing with the currency, neither can they act as a middleman for putting buyers together with sellers. Essentially China doesn’t want the anonymous nature of bitcoin to allow citizens to buy things off the radar and it’s hit the banks to make sure that doesn’t happen.
Not everyone saw it as a bad thing though, with some suggesting China was merely trying to regulate Bitcoin, but that didn’t stop the price starting to tumble. It somewhat recovered after falling from $1100 each down to the $700s and then cruised there for a while, but yesterday with the announcement of further regulation, it’s only gotten worse.
In the last 24 hours China has announced that bitcoin exchanges will no longer be able to accept payments in the official Chinese currency, Renminbi. Third party payment providers have also been ordered to stop offering clearing services to those same exchanges by the end of January.
This means that Chinese bitcoin buyers and sellers will only be able to do so on a one to one basis, not selling en-mass via online services. It’s still doable but it’s gotten a lot harder.
This has led to the current state of bitcoin, which at the time of writing is priced at $655 per coin. Looking to Fiatleak for the current bitcoin buying trends too, China isn’t buying much. Funnily enough though, the US buys appear to be on a new high.
KitGuru Says: What’s very interesting about this turn of events, is how despite the decentralised nature of the currency, government sanctions and regulations can have a massive impact on its ability to operate and on its potential value as well. What would happen if this sort of crackdown happened in another huge, but more established market, like the US?[Cheers CityAM]