Bitcoin Markets Continue to Slide on PBOC News

As usual confusion is surrounding the most recent news out of China.


Early Thursday it was reported by multiple media outlets that the PBOC had ordered banks to close the accounts of virtual currency exchanges. At first many thought the news was just another false rumor for the purpose of depressing the market to allow a cheap buy in. It appears, however, that the reports may have been correct (including those at CryptoCoinsNews) and that Chinese domestic banks may no longer do business with websites that trade in digital currencies. According to the reports the PBOC will require the banking accounts of the various Chinese virtual money exchanges to be closed by April 15. The news was mostly discounted at first with Reddit bloggers calling it FUD and markets reacting reluctantly. However, the Wall Street Journal is also reporting this story with quotes from Bobby Lee, Chief Executive Officer of BTC China.

It is also important to note that the story has been reported as fact by the Chinese news media, including by the online business news service Caixin. The Wall Street Journal Reported that Bobby Lee, Chief Executive Officer of BTC China had stated that he had not seen the document but is concerned the reports could be true. When Bobby Lee was asked if customers would no longer be able to use banks to deposit funds he said:

“If the rumor turns out to be true, that’s what’s going to happen.”

He continued:

“At this time it’s too early for me to elaborate on what steps we will take, …We will take it one day at time.”

Though banks may no longer be able to deal directly with exchanges, it may be possible for customers to make deposits directly. Perhaps this is the reason the markets did not react with extreme price drops as seen in early December when the PBOC issued similar statements saying that banks could no longer engage in Bitcoin business. If customers are allowed to make deposits directly into the exchanges, it may represent more of an inconvenience than an actual halt to the trading. In any case, relatively speaking, the Chinese markets so far have not reacted with the same quick and dramatic price falls as previously with PBOC news. Possibly some of this has been priced in as the rumors have already been circulating.

PBOC issues new statement on exchanges

Prices slide after PBOC issues new statement on exchanges

As of the writing of this story, Bitcoin Markets are down 21% from 592 to 470. (Price was falling during the writing of this article) This fall compares to the early December drop of over 50%. Of note is the fact that, in early December, we were coming off the highs and now much of these negative news stories have already been priced into the market. It will be interesting to see how the Chinese markets continue to react to this news that cannot be positive for trading there. It should be noted that the Chinese markets are, in fact, quite important for Bitcoin so we will not see US markets reacting much better. In particular Litecoin is heavily traded on the Chinese markets.

In writing this article, it was clear that many bloggers and online commenter s seem to criticize the Chinese for the actions of their central bank. In fact, it is important to realize that many Chinese yearn for the freedom that virtual currencies represent while many in the West easily fall for Banker sponsored FUD. For example, as if the recent IRS ruling is some empirical finding, the Bloomberg article on this story repeatedly refers to Bitcoin as a commodity. More than likely the Bloomberg article represents a continued inability of mainstream journalists to understand the Bitcoin protocol and what it is about. In reality Bitcoin has many superior qualities as a transactional currency and does not do so well as a commodity. This is because its value depends so heavily on what the state might do to restrict its use, as this story is evidence of.

It is clear that the PBOC is intent on controlling Bitcoin. It will be interesting to see to what lengths they will go to in order to achieve this. Many people in China mine Bitcoin for a profit and sell and build Bitcoin mining equipment. The actions of the PBOC have cost Chinese investors a lot of money. Will the PBOC out of its own monetary interests continue to punish so many profitable enterprises?

source: http://www.cryptocoinsnews.com/2014/03/28/bitcoin-markets-continue-slide-pboc-news/

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