Why China is Right to be Wary of Bitcoin (BTC)

Why China is Right to be Wary of Bitcoin (BTC)

Why China is Right to be Wary of Bitcoin (BTC)

$BTCUSD

  • China has cracked down on Bitcoin shuttering cryptocurrency exchanges, the Bottom Line

The wave of sell orders that hit the US ‘coin’ market on 10 October 10 should not have surprised anyone who watches it carefully, we saw it coming months ago.

Bitcoin (BTC) and other cryptocurrencies, began falling in price after China’s government decided it did not like the market.

Bitcoin Bulls denied it, laughed it off, but the lack of continuing Chinese investment has caused a 68% dive in the market, from $20,000 at its peak last December to $6,277 early on 11 October.

Currently, Bitcoin is trading at: 6,473.52, +4.24, or +0.0655%, as of 5:42a BST, the market is open

Things have been worse; Bitcoin traded near $6,000 in August. And of course, Bitcoin prices are still subject to sudden violent selling sprees, like the $200-M drop that happened as Asian trading opened on 11 October.

As this was written the total value of bitcoin had fallen below $115-B. The “currency of the future” should not have a smaller market cap than Nike (NYSE:NKE) now should it?

China moved against Bitcoin before the trade dispute with the US began because mining of the cryptocurrency and its transactions use as much energy as the country of Ireland, according to PwC. China recently jailed one cryptocoin miner who was stealing power from the train network.

A recent paper estimated that China still represents 74% of Bitcoin mining. This was portrayed as a threat to the market and called China “the most powerful adversary to Bitcoin.”

Chinese dominance in Bitcoin is not news.

We here at HeffX-LTN have been covering this story for over a year now..

What Bitcoin Bulls most want is American participation in the market.

The Securities and Exchange Commission (SEC) has been slow to approve Bitcoin exchanges, with 1 expert recently expressing hope that public opinion and Congress could get the agency moving.

But Western economists remain wary.

Nouriel Roubini calls Bitcoin “the mother of all bubbles.” In congressional testimony on 11 October, he called blockchain technology “no better than a spreadsheet,” predicting the imminent collapse of the crypto market.

Western regulators and financial institutions are reluctant to endorse anything associated with crime, and cryptocurrency is still associated with crime.

Malware that mines or steals cryptocurrency and the use of Bitcoin to skirt currency controls in collapsing markets are both crimes.

The 5 November launch of Bakkt, a set of cryptocurrency futures contracts run by the founder of the Intercontinental Exchange (NYSE:ICE), owner of the New York Stock Exchange, is the latest hope of the Bitcoin Bulls.  By giving Bitcoin a legitimate trading platform, subject to government regulation, it is thought that big institutions will finally enter the market and legitimize Bitcoin

But so far the presence of Bitcoin futures contracts on the NAS, CME and CBoe has not stabilized the price.

The announcement of a European exchange  called Extauri, similar to Bakkt, has not stabilized the price either. Neither has Yale’s $400-M investment in Paradigm, another new trading platform.

Why?: Because trading platforms don’t make assets valuable, and institutional interest does not make an asset valuable.

What does makes an asset valuable are willing buyers who have a use to make of an asset.

As it is right now, the primary use of Bitcoin is as an alternative for wealthy people to use if and when local currencies collapse. But until the price of Bitcoin stabilizes it cannot do that.

It is a “safe haven” only as a mechanism to get from a failing currency to more stable currencies like the USD.

And even that legal use of Bitcoin violates some nations capital controls.

Have a terrific weekend.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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