Bitcoin traders faced a major setback yesterday when rumors indicated that the price of bitcoin had fallen by a drop of approximately 5% stoked the bitcoin market. This news came shortly after a tide of gains on bitcoin exchange was experienced few weeks ago. Bitcoin price had been steadily increasing by more than 20% over the past few weeks. However, it fell yesterday by more than $40. This report though unconfirmed has caused panic in the market and the Chinese regulators are now working towards restricting such exchange activities.
This report was first published by Bloomberg and indicated how the Chinese are planning to regulate the bitcoin exchange market by limiting the amount of bitcoin and other similar digital currencies from moving bitcoins outside the country and enforcing caps on the measure of bitcoins that can be sent to another country. “China is contemplating to put in measures to limit bitcoin transactions that take funds out of the country..” Part of Bloomberg sources states.
The article proceeds to imply that a few financial specialists purchased bitcoins on nearby exchanges and sold them abroad, hence avoiding foreign exchange rules. Although the article has been pulled down, it has raised a number of questions in the bitcoin’s community, but Bloomberg confirmed that an article by Steven Yang, Bloomberg’s Beijing correspondent, used by ZeroHedge and Sina as a source, is authentic.
The whole bitcoin price collapse started slightly after 15:00 UTC, as soon as the rumors began to spread. Analysts peg the rumors to causing such price fluctuations that spread from a high of $744 all the way to a $677 low. They claim that such behavior has previously been witnessed in the bitcoin exchange market in order to create a market panic which has, in turn, led to speculative market activities.
Indeed, this is the case in the year 2013. Furthermore, this is when the bitcoin’s price hit the ceiling. That said, it takes a rumor that China was planning to ban the use of bitcoins. Ultimately, this leads to a panic that saw bitcoin prices decline steeply. Chris DeRose who hosts one of the bitcoin podcasts has noted that China uses such tactics many times to stir up speculative trends in the market. He additionally equated China to a black box that keeps scaring away bitcoin investors.
Still, it is not clear if China takes more prohibitive measures towards bitcoin exchanges. However, it seems likely. Ultimately, we feel this way according to Bloomberg’s report. Moreover, the Chinese government may limit Chinese bitcoin investors. More specifically, they put limits from sending bitcoin outside of China. As a result, it practically may confine Yuan to USD exchange through bitcoins.