by Tanzeel Akhtar
Bitcoin is going through a turbulent period. The cryptocurrency fell last week on the back of Chinese regulators imposing a ban on individuals and businesses from raising funds through initial coin offerings (ICOs).
The latest news emerging from China is that domestic Bitcoin exchanges are to be shut down entirely, delivering a final blow to a once-thriving industry of commercial trading for virtual currencies. The virtual currency dropped to around $4,100 on the China ban. Earlier this month it reached a record high of $5,000.
As of this writing, the virtual currency is trading at $4,343.1.
However, market participants have said they are taking this latest news with a grain of salt as it is not the first time China has made threats to ban Bitcoin. Despite the ban, Bitcoin will remain universal and China’s Bitcoin fans will find another way to access the currency.
Eddy Travia, CEO of Coinsilium said:
“A Chinese ban on trading digital currencies would put China at risk to isolate its entrepreneurs, companies and consumers from the numerous opportunities represented by the innovative applications of digital currencies and blockchain. When innovation and entrepreneurship are stifled, local talent, jobs and economic benefits move somewhere else.”
Bitcoin to Remain Universal
Travia adds:
“Bitcoin remains a universal store of value and a recognized means of payments in several large economies and I am confident the innovation and wealth creation digital currencies and blockchain have generated for the last few years will keep increasing in the future, regardless of local trading bans. We are just at the beginning of the world-wide adoption of digital currencies, it will happen faster in some countries than others."
China Making Empty Threats
Jeffrey Van de Leemput, co-founder of BTC-finance and a sales representative at Sendcloud, a company based in the Netherlands, has been following the cryptocurrency marketplace from its inception. Over the past few years he explains, we have seen a number of attempts by the Chinese government to ban Bitcoin and cryptocurrencies in general.
Notes Van de Leemput:
“Right now the Chinese government is going to attempt shutting down exchanges in China until they have come up with proper regulations. They know this will only cause a short-term disruption of the availability of cryptocurrencies in China. The problem the Chinese government faces is that it is virtually impossible to completely ban cryptocurrencies due to their decentralized nature. You can compare it to ripping out weeds, they will always grow back.”
This latest ban is expected to only affect the price and availability of Bitcoin and other cryptocurrencies in China for a few days, maybe weeks.
He adds:
“The Chinese people will find another way to get their hands on cryptocurrencies. The only thing that will happen now is that people will have to do so illegally. At least until regulations are in place and the exchanges can continue their operations.
Sasha Ivanov, CEO of Waves Platform explains that the cryptocurrencies are still very volatile. Daily fluctuation of Bitcoin, for example, can be 10-15% or even more. The reason: a relatively small capitalization of the cryptocurrency market.
To put things into perspective, the current market capitalization of Bitcoin is only about $80 billion dollars, Ivanov adds. This is about three times less than the volume of daily transactions seen by conventional credit card issuers such as Visa (NYSE:V). There remain a number of risks surrounding the currency. As well, according to many, Bitcoin is in bubble territory.
Bitcoin Legal in Japan
In contrast to China, which is taking a step back by banning Bitcoin, Japan has legalized the cryptocurrency.
“We already see how the situation is changing in a positive direction," says Ivanov. "And the more liquidity there is in the Bitcoin market, the more stable the exchange rates will be. We can start talking about the bubble only when the market cap of crypto currencies exceeds the $1 trillion mark, not earlier.
"So there's still a lot of potential for growth. Until now only Japan has officially legalized Bitcoin, so I wonder which benchmark the exchange rates would achieve if several more countries followed that.”