A report from the Daily Express (UK) discusses China's role in the bursting of the bitcoin bubble. From an economic perspective, we don't think Bitcoin is a bubble, but some people think it is. Whether they are right or wrong is a matter for debate. The report is based on the fact that since September 2017, buying and selling of bitcoin with the Chinese yuan¥ has fallen from 90% of the world's total to just 1%.
This is, of course, partly due to China's decision to ban all transactions with cryptocurrency.
The Daily Express writes the following:
“The blanket ban in China began in early February 2018, when the People's Bank of China - the central regulator for financial institutions and monetary policy - issued a statement that it would "block access to all domestic and foreign websites of cryptocurrency exchanges and ICO trading platforms." However, the process began even before the outright ban, and the People's Bank of China has now confirmed that it has facilitated risk-free market exits for 88 cryptocurrency exchanges and 85 ICO trading platforms since September 2017."
Experts believe that the increased interest in China between September 2017 and February 2018 had two main effects.
First of all, this contributed to the rise in prices for bitcoin. Soaring prices and the emergence of new types of cryptocurrencies have further increased interest in China. This, in turn, caused some concern, given that the Chinese bitcoin market share was 90 percent of the global market - this could well affect the stability of the yuan. Therefore, the authorities issued a ban. After this, the share of the Chinese digital market in the global market dropped sharply, along with the price of bitcoin. Which led, as some think, to the bursting of the “bubble.”
We don't think so and aren't sure how accurate the statistics provided by the Daily Express are, as it's unclear what that 90% of Chinese sales for September 2017 includes (whether it's 90% of sales in both fiat and cryptocurrency, or 90% of sales in yuan alone). If these are yuan sales, given that the yuan is generally only used in China, Tibet and Zimbabwe, it is obvious that 90% of yuan bitcoin sales will be in China.
In any case, the argument is valid, and the actions of the Chinese authorities did have an impact on the markets, but the comparison to a bubble has no economic justification.
According to cryptodaily.co.uk
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