Bitcoin’s Fate Untethers From China
Even as a number of smaller Chinese cryptocurrency exchanges suspended all operations last week, two of the country’s largest trading venues, Huobi and OKCoin, said they would only be suspending yuan-based cryptocurrency trading, allowing users to continue trading between different cryptocurrencies.
However, the two exchanges backtracked on Saturday, stating that they now plan to end all services for Chinese customers. Local media also reported that travel bans had been issued for the two exchanges’ executives, pending a government investigation into the venues.
Interestingly, this major shift didn’t have the predicted effect on Bitcoin prices. While news of the smaller exchanges shutting down last week sent Bitcoin prices tumbling by more than 40% from a high point of $5,000 earlier this month, there was no such outfall following OKCoin’s and Huobi’s announcements. In fact, Bitcoin prices recovered dramatically by 32% from a low of $2,983 on Friday to $3,926 at the time of this writing on Monday.
This suggests that China’s influence on the price of Bitcoin has been overestimated.Although the country’s cryptocurrency exchanges previously accounted for circa 90% of global Bitcoin trading activity, according to some sources, meaning prices reactedsignificantly to Chinese regulators’ moves, it seems that the cryptocurrency may now be diversified enough to insulate prices against events in China. It remains to be seen whether any one country will now fill this vacuum, or whether trading volumes will continue to become more geographically distributed. If the latter happens, we could see Bitcoin prices stabilize as the cryptocurrency becomes less dependent on a single country’s attitudes toward it.