When it comes to banning popular and emerging technologies, China is renowned for being a little trigger-happy. It has implemented multiple bans on Wikipedia, for example, while Bitcoin and ethereum are the latest innovations to face the wrath of regulators.
After authorities reported a rise in fraudulent activity involving Bitcoin and ethereum (both of which are the products of the progressive blockchain technology) both China and South Korea have banned margin traders from dealing in these currencies.
Effective immediately, the ban has targeted digital currencies and prevented the users of online brokerage platforms such as LCG from diversifying using these assets.
Cyrptocurrency Broker Apps
Apps such as Coinbase have made it easier for your average Joe to access bitcoin and their user-friendly interfaces and slick design make buying and selling altcoin much more accessible. However, it is precisely these cryptocurrency brokers that have caused the BTC value to fluctuate so wildly over the last few weeks. China announced that it would force the closure of all altcoin brokerages causing the value to nosedive but as of this week following a rumour that the government would go back on its statement Bitcoin reached a record high around the $5200 mark.
Appraising the Immediate Impact and the Future for Bitcoin in China
As with every seismic or unexpected development; the markets reacted badly to China's ruling. The value of Bitcoin instantly plunged by around 20%, for example, which trading activity and investor sentiment also wavered. Much of this has to do with the fact that traders have suddenly been forced to deal within a restricted rang of assets, while there is now less opportunity in terms of highly profitable margin trading.
It is also fair to surmise that the future of Bitcoin in China is far from positive, with analysts suggesting that the recent ruling could end the local currency trading market for good. After all, it is anticipated that the decision has been taken as part of a larger, multi-platform program to minimise risk in the financial sector, with this initiative likely to rollout over the course of months and potentially years. Given China's history of strong and stringent decision-making, the prospect of this ban being reversed in the foreseeable future is remote in the extreme.
Why the Global Market need not be concerned
While China may have essentially banned cryptocurrency and associated margin trading, there is no immediate cause for concern within the global marketplace. In fact, traders are adamant that the market is far from dead, with many existing exchanges having simply enabled their traders to buy and sell Bitcoin directly. To achieve this, they have altered their proposition and evolved as peer-to-peer markets, while also offering overseas-based initial coin offerings (ICOs) to traders.
As a result of this, scarcely any exchanges are scheduled to close in the near-term future, minimising the impact on the global market and international traders.
Intriguingly, the market is now seeing a short-term boom after the initial shock has been absorbed, with investors having recognised a unique opportunity as the price of Bitcoin in China plummets. This means that international traders are able to trade this at discount levels, minimising costs and potentially delivering huge, margin-based returns.
These developments highlight the unique agility of cryptocurrency and the individuals who trade it, and it is this that has minimised the impact of China's decision to ban Bitcoin and ethereum. So while the ban is likely to remain in place for years, this will not stop the global market from booming or international investors from making hay.