Skip to content

China’s Crackdown: Why Bitcoin Will Continue to Thrive

September 15, 2017, the Chinese government officially issued a ban on all Bitcoin exchanges and trading platforms. The ban did not come as a surprise, rumors had been circulating for some time, but the ruling still triggered a mass exodus of investors. When rumor became reality a nervous market began selling off, sending the price of Bitcoin into a slide. The talk in the crypto-community immediately turned to whether Bitcoin was a bubble and this was the beginning of the end for the digital currency.

However, experience investors know that the price dip and setback with China are mere bumps in the road and Bitcoin’s path to growth will continue. As a proof point, by press time the price of Bitcoin had already recovered from $3,000 up to $4,011.

Here are just a few reasons and arguments from the experts as to why Bitcoin and digital currencies will be unaffected by the China exchange and ICO ruling.

Facebook and Google are Banned from China and Still Thriving

If there’s a precedent to be set about China’s ability to stifle innovation, one only need to look to companies like Facebook and Google. Both platforms can easily be characterized as giants worldwide with billions in earnings and mass adoption. What’s more, both platforms have also been banned in China.

There’s no doubt that China is a huge market, but Google and Facebook have thrived despite having no presence there.  

Stelian Balta, Founder and Managing Partner of HyperChain Capital had this to say: “Digital assets can be considered commodities trading on supply and demand. There is fixed supply and increasing demand. China is an important market and the recent news of exchanges shutting down and ICO funding being banned certainly has a short term negative effect on the prices. However, digital assets are a global phenomenon. Huge Internet businesses like Facebook or Google are banned in China and are doing pretty well.”

In fact, China only accounted for 6.4 percent of global Bitcoin trades. The world of cryptocurrency is still growing and has a long way to go before it overtakes traditional currency. In short, there’s plenty of opportunity left in the digital currency marketspace.

Trading Volume has Moved to Japan

Once China left the digital currency market, other countries were ready and waiting to take up the slack. Case-in-point, according to CryptoCompare, Japan became the leader in volume by currency with 50.75 percent market share of the global Bitcoin exchange market in the days after the ban. The three largest exchanges, BTCC, Huobi and OKCoin immediately moved to Japan after the ban, boosting it to the number one position. Time will tell how Japan continues to fair against the usual leaders of Korea, Europe, Great Britain, and the United States, but China’s ruling has opened up opportunity.

Some experts are even arguing that the China ban could be beneficial to the rest of the market. Litecoin creator Charlie Lee, said, “This is a good thing. China can no longer play with the markets by banning Bitcoin. Cryptocurrency cannot be killed by any country. One solution to centralized exchanges is decentralized ones.”

Bitcoin’s rebound in price post China ruling serves as proof of Lee’s statement that no single country determines the fate of digital currency. The heart of Bitcoin and other coins is decentralization. They are the people’s currency and governments will never truly be able to stomp them out.

Bitcoin Always Recovers

Tom Lee, the former JP Morgan Chief Equity Strategist and current Head of Research for Fundstrat, made an appearance on CNBC’s Fast Money about Bitcoin is still a strong investment and store of value. “I unequivocally believe bitcoin is your best investment to the end of the year.” Lee went on to say that he believes Bitcoin will be worth $25,000 in five years.

Bitcoin investors are used to these types of swings in price because one thing remains true: Bitcoin always recovers.

[mk_mini_callout title=”Free Download” button_text=”Get the Ultimate Investor’s Guide to Bitcoin IRAs” button_url=”/resources/investor-guide”][/mk_mini_callout]

Japan Firm Shows Love to Bitcoin With Insurance for Bitcoin Exchanges

It is no longer news that Japan is one of the most conducive countries for Bitcoin operations. Bitcoin is already recognized as legal tender on par with the Yen in terms of acceptability. Of course, Japan used to be home the world’s biggest Bitcoin exchange, the now defunct Mt. Gox. In October, Japan decided to curb sales tax on Bitcoin purchases as part of efforts to boost the use of the cryptocurrency in the country.

The Nikkei Asian Review reported that the Japanese Financial Ministry and the country’s Financial Agency are in talks to end the 8% consumption tax rate. Now, there’s another piece of good news for Bitcoin coming out of Japan that will gladden the heart of Bitcoin investors. The Nikkei Asian Review reports that Tokyo-based insurance firm Mitsui Sumitomo Insurance is developing an insurance product that will cover damages and losses at Bitcoin exchanges.

Here’s what we know about the new insurance coverage for Bitcoin exchanges

Mitsui Sumitomo Insurance is reportedly working with bitFlyer to develop an insurance product for Bitcoin exchanges. The insurance premium payable will vary from one exchange to the other but actuarians forecast that the premiums will range between several hundred thousand Yens to several million Yens.

One of the great perks of having insurance coverage for Bitcoin exchanges is that it would ease anxiety among Bitcoin owners that their precious crytocurrency could be lost overnight in an hack. Security experts observe that a single successful cyberattack on a Bitcoin exchange could wipe out billion of yen in Bitcoin. Most small exchanges don’t have enough resources to create a security system that might keep the bad guys out and even the best security defenses might still succumb to the efforts of a determined hacker.

Bitcoin exchanges can now enjoy insurance coverage

In the last couple of years, the Bitcoin industry has suffered setbacks in the form of data breaches, hacks, and stolen Bitcoin at exchanges. If you lost money in the last couple of hacks targeted at Bitcoin exchanges, you might want to relax because the trouble days are over. According to the report, the Japanese insurance firm will provide coverage against damage and loss to Bitcoin exchanges for 10 million yen to 1 billion yen, which is between $88,000 and $8.8 million.

Another great feature of the insurance coverage is that it protects Bitcoin owners in the event of losses due to internal issues. Bitcoin exchange might make dumb business moves or its workers might perpetrate fraud but insurers are not usually willing to cover losses that happen because of internal issues. For instance, in 2015 BItpay suffered the theft of 5,000 Bitcoins during a phishing attack. Its insurer has refused to cover the losses which is running under a million dollars.

Mitsui Sumitomo Insurance has also revealed that its insurance policy for Bitcoin exchanges will also cover other costs that might accrue after an incident. For instance, the insurer will bear the costs of reaching out to customers in the event of a data breach; the insurer will also settle damage suits that might be filed against the exchange in the event of theft, losses, hacks, or data breaches.

Bitcoin Exchanges Now Get Insured

Five Reasons to Invest in Bitcoin

There are many reasons to invest in Bitcoin, for some time the digital currency has attracted a lot of attention in the world of alternative asset classes. Many analysts believe it has the ability to surpass the market cap and usage statistics of fiat currencies, owing to its versatile method of payment.  It’s growing adoption, limited supply and low cost transactions have made it a lucrative investment opportunity for traders. Even those on Wall Street have taken note.

In 2015, the New York Stock Exchange launched a Bitcoin index, NYXBT. The Winklevoss twins launched Gemini, a fully licensed and regulated Bitcoin exchange. There is also a Bitcoin ETF, which could appeal to institutions, pension plans and 401(k)s that might want exposure to Bitcoin.

Despite all this activity, Bitcoin, still in its nascent stages has some way to go before winning over the skeptics critical about investing in it. In this article we compiled some reasons to invest in Bitcoin as we believe it makes sound financial sense to board the Bitcoin train for the long run.

Fixed Supply:

One factor that makes Bitcoin valuable over the long term is the supply cap in place. Once it reaches the magic figure of 21 million (expected to happen around 2140), the value of Bitcoin will stabilize over higher belts. It would be an extremely profitable investment to hold.

Adoption increases the value:

It has been observed that, as more and more merchants and companies adopt Bitcoin, it is proving out to be a Bitcoin price booster. As the technology evolves, Bitcoin is expected to serve a crucial role in the transactions of the future. This would certainly add credibility and value to Bitcoin over time.

Bitcoin Adoption

Positive approach from most Governments towards adoption:

Bitcoin LegalityThe digital currency businesses and consumers are aware about how Bitcoin is defined and regulated at most places. For example, the IRS (Internal Revenue Service) treats Bitcoin as property, while the CFTC (Commodities Futures Trading Commission) treats it as a commodity. With the EU clearing the VAT on Bitcoin trades, and the commencement of an ETF in South Korea, the global scenario looks positive.

While Bitcoin is Digital Gold, it is still undervalued:

The closest analogy to Bitcoin is Gold in all the right measures. It is scarce, has a finite supply, highly divisibility and cannot be counterfeited. However, one aspect where Bitcoin outshines gold is utility. Gold is only good for jewelry and in industrial production processes. Once it becomes costly, it becomes less useful for both. Bitcoin on the other hand, becomes more useful as a currency in both the scenarios.

Heavy players using it as portfolio diversification tool:

There has been a fundamental shift in the types of investors interested in Bitcoin. What started off as a mere speculative investment opportunity, has now transformed into a full scale investment play. This can clearly be seen in terms of volume flowing into Bitcoin during global economic uncertainty (read Bitcoin and Brexit). Major financial institutions being a part of this change is what makes investing in Bitcoin assuring.

Thus, based on these reasons, it is safe to say that Bitcoin is a game changing investment. Its disruptive nature and ability to revolutionize global trade are just a few of the reasons to invest in bitcoin.