Category Archives: China

How Chinese is Bitcoin? — Part 1: Trade Volume

By Neil Woodfine via blockunchained.com

  • “Chinese exchanges generate most of their revenue from CNY withdrawal fees [4]. And these CNY withdrawal fees are tiered based on each trader’s trade volume, encouraging traders to trade as much as possible to lower the cost of withdrawing their profits”
  • “But overplaying China’s trade volume leads to the wrong conclusion that bitcoin’s value is purely derived from its role as a speculative plaything for Chinese investors. It leads people to make the mistake that there is existential risk to bitcoin in the Chinese government’s treatment of bitcoin trading, or just Chinese traders’ whimsy”What’s really at work is that China is increasingly leading the world in internet technology

Read more here..

China facing full-blown banking crisis, world’s top financial watchdog warns

By Ambrose Evans Pritchard Via telegraph.co.uk 

  • “Outstanding loans have reached $28 trillion, as much as the commercial banking systems of the US and Japan combined. The scale is enough to threaten a worldwide shock if China ever loses control. Corporate debt alone has reached 171pc of GDP, and it is this that is keeping global regulators awake at night”

china-debt-to-gdp

Read more here..

 

Chinese exports crash 25%, Yuan devaluation in focus

Via zerohedge.com

[Editors Note: yet more strengthening in the Bitcoin fundamentals as Chinese currency devaluation escalates which could lead to increasing Bitcoin and precious metal inflows]

  • “Things are not getting better in China as Exports crashed 25.4% YoY (the 3rd largest drop in history), almost double the 14.5% expectation and Imports tumbled 13.8%, the 16th month of YoY decline – the longest ever”
  • “As a reminder, China’s policy response has already been announced. The National People’s Congress set a target for 13% growth in money supply in 2016, up from 12% in 2015, and a 3% of GDP fiscal deficit, up from 2.3%. In other words: more lending and more public spending to provide a boost to demand.”

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Why A Hedge Fund Manager Who Made A Killing From Subprime Is Buying Bitcoin

Via Zerohedge.com

  •  “Hart believes that the Chinese crawling devaluation is an error as it carries with its the latent threat of much more devaluation in the future, thus encouraging even more outflows, which in turn forces China to sell even more reserves, which destabilizes the economy even further, forcing even more devaluation and so on”
  • “So what is one trade that can be put on to bet on further Chinese devaluation (or outright economic collapse) with limited downside, with unlimited upside, and one which is guaranteed to be profitable if and when the local Chinese depositor herd gets out of Yuan en masse after the next 10%, 20%, 50% or more devaluation and rushes into bitcoin?”

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Chinese “Lose Faith In Collapsing Stock Markets/currency”, Import Most Gold Since 2013

Via zerohedge.com:

  • “After a two year hiatus in which the Chinese population gingerly rotated from the burst housing bubble to the now burst equity bubble, the legacy battleground has been once again restored, with Chinese equities and currency, a proxy for China’s central bank preserving control over an increasingly more chaotic system on one side, and with “alternative” assets such as gold and bitcoin on the other”

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Chinese Debt destruction & non-performing loan cycle could lead to huge debasement of Yuan

Via Kyle Bass @ wallstreetweek.com,

[Editors Note]

Debasement of the Yuan would be extremely bullish for alternate money/currency including Bitcoin and Precious metals.

China has $22 trillion in deposits part of which could soon find its way into these assets, if debasement and capitals controls for the Yuan hits.

  • “Given our views on credit contraction in Asia, and in China in particular, let’s say they are going to go through a banking loss cycle like we went through during the Great Financial Crisis, there’s one thing that is going to happen:China is going to have to dramatically devalue its currency.”

Read more here..

 

China Announcements V Bitcoin price – And why investors should look at the bigger picture

[The Following Article is by Renegade Investor Chief Editor – Edward Blake] Originally Posted 2014

In the last few months, there is no doubt that many in the Bitcoin investment space are getting weary of the constant threats emanating out of China and the PBOC with relation to Bitcoin regulation. In particular with how Bitcoin exchanges and financial services can operate within China.

In fact whilst many investors obviously want China and the Chinese citizens to participate in the Bitcoin economy, especially due to the high trading volume they bring to the market. They are now looking to the Chinese government to officially state their position regardless of what it is, to try and underline the ambiguity surrounding their regulatory stance.

The goal of this? To end the uncertainty which has plagued the bitcoin price over the last 5 months (which we will look at shortly). This has no doubt played a part in frightening away the weaker hands which helped fuel Bitcoin’s $1000+ move back in November 2013.

Whilst there is no definitive answer or evidence as to why there has been so much ambiguity and uncertainty regarding China’s official stance on Bitcoin regulation. Possibilities discussed range from a lack of understanding on the part of regulators grappling with this new technology, to deliberate manipulation in order to lower the bitcoin price.

So what has been the effect of the announcements on the bitcoin price? And should current or potential investors really fear the regulatory stance of China?

The effect of the announcements:

The following charts show the price drop following Chinese regulatory announcements/rhetoric from the beginning of the announcement to the end of the short term down trend.

Dec 5th: Peoples bank of China Starts rhetoric on restricting financial institutions from handling Bitcoin, issues statement Baidu and China Telecom stop accepting Bitcoin

Price drops $1130 to $540 – 52% drop.

China Price drop December 5th 1130-540

Dec 16th:  China’s payment processors told not to deal with Bitcoin.

Price drops $857 to $381 – 55% drop.

China price drop December 16th 857-381

Mar 28th: Rumours of new China bank restrictions.

Price drops $570- $339 – 40% drop.

China price drop Mar 28th 570-339

April 25 2013: – PBOC further restrictions Bitcoin exchanges, restricting Bitcoin transactions through rechargeable funding codes.

Price drops $500 – $438 – 12.5% drop (currently)

China drop April 25th 500-438

 

Summary:

Chinese price drop summary table

Whilst you have to take into account other factors such as profit taking, technical weakness, momentum trading and the Mt.Gox affair over this 6 month consolidation period. It is clear that these Chinese announcements have had a profound effect upon the drop in the bitcoin price.

But looking at the summary, the effect of these announcements appears to be diminishing as bitcoins move into stronger hands and new investors enter the market looking for bitcoins that are potentially offering a discount under fair market value.

The Bigger picture:

For people currently invested or looking to invest in bitcoin, it is important to remember that Bitcoin is a lot bigger than any one country, even if that country is one of the biggest players on the world stage.

It could and has been argued that Bitcoin is one of the biggest and most important technological innovations in human history and the likelihood of it going away anytime soon, could be conceived as being very low. Whilst bitcoin remains a speculative high risk investment in the near term, it is worth bearing this in mind.

In addition to this, regardless of China, there are approx 200 sovereign states in the world not all of which are taking such a hard stance towards Bitcoin regulation.

These states cumulatively have tens of trillions in wealth currently located in stock markets, pensions, savings accounts, bonds, forex and commodities. Not to mention the wealth in offshore accounts that some estimate to be around $21 trillion.

If even a small percentage of this money makes its way into the Bitcoin market, it is not difficult to conceive a bitcoin price many multiples of its current $5-6 billion market cap.

It is also worth remembering that bitcoin is a global currency. As such, the opportunity for regulatory arbitrage ensures that there will always likely be a state that recognises the value of Bitcoin and are open and willing to cooperate with Bitcoin entrepreneurs, exchanges and start-ups to help build a robust Bitcoin economy. Evidence of this is the growing amount of Venture capital (VC) moving into the Bitcoin space, which is estimated to total approx $500 million by the end of 2014. A number almost in line with the rate of VC the internet attracted during its early stages.

It is these states that will likely force the hand of the more reluctant states in the long term, as they enjoy the competitive advantage that comes from a growing Bitcoin economy that benefits from the use of an efficient, low cost, frictionless transaction network.

Conclusion:

Whilst it is likely beneficial to take note of any regulatory moves from individual states that affect the bitcoin price, when making an investment decision to enter of leave the market. It is always worth bearing in mind the bigger picture of Bitcoin as a whole and why the underlying fundamentals perhaps offer an opportunity much greater than can be affected by any individual state.

Disclaimer