For the past couple of months, whenever Bitcoin price gets momentum and is approaching the all-time high, China has played a spoil sport in ruining the price rise. This happened once at the start of 2017 when the probing of Chinese authorities into the operational model of the exchanges tanked the prices all the way back to $750 from near all-time high. The story of Bitcoin on 9th February is no different, the cryptocurrency was in a study Bull Run and the currency’s proponents were expecting a high breach sometime this week. While everything looked compact, the new announcement of the leading Chinese exchanges Huobi and OkCoin came up with an announcement that made the markets instantly bearish on the short term scale. Let’s dive deep into the details of what exactly happened:
Two of China’s top three Bitcoin exchanges Huobi and OkCoin announced that they will suspend Bitcoin and Litecoin withdrawals for a month effective immediately. During this one month period both the exchanges would set up automated monitoring systems and checks in place to prevent money laundering. While these restrictions are in place, Reminibi withdrawals wouldn’t be affected and no limit is set upon them. Both the exchanges indicated that the upgrade would be to combat “money laundering, exchange, pyramid schemes and other illegal activities”. No update was provided by BTC China on this front.
The reason behind the scrutiny:
China has been facing the problem of ‘Capital Flight’ for some time now. Implementation of ‘Capital Controls’ over various assets hasn’t been fruitful. During the course of 2016, Chinese Government has realized that while Yuan was being devalued, Bitcoin experienced unusual surge in prices. This was because investors were shifting their funds from traditional Chinese assets to Bitcoin. Chinese officials and PBOC have come to a conclusion that Bitcoin is being used for ‘Capital Flight’ and are keen to impose capital controls over the digital currency in 2017.
Effect on Bitcoin Price:
While the currency temporarily is experiencing a short term bearish trend, things would look better after a month’s period when the exchanges become fully functional. The impact of the move shouldn’t last long as Japan has already begun eating into China’s volumes owing to their growing adoption. When the Chinese exchanges imposed transaction fee and put a check on leverage available, the automated traders have sought Japanese exchanges as their new haven. After a little setback, technically Bitcoin market should be able to recover in quick time.