Bitcoin Value Plummets Due to Chinese Restrictions
Has the Bitcoin bubble burst? Quite possibly not just yet however the fact that trading in the virtual currency has been restricted on BTC China has had a huge impact on the its value. Bitcoin value has halved since news broke that the worlds biggest Bitcoin exchange in terms of volume may no longer accept yuan based deposits. Last month Bitcoin reached an all time high trading at $1,250 per 1 Bitcoin and this week has been as low as $421 on some exchanges and on MTGox as low as $480 per Bitcoin. Emily Spaven from website CoinDesk states that, "A lot of people put Bitcoin's rise over recent months to China where interest in it has gone through the roof,” and that, "People are getting frightened that with the new regulations the country could now drop out of the ecosystem. Going forward, it's certainly not the end of Bitcoin, but people have been panic selling."
The problem is due to the fact that China’s central bank does not license Bitcoin exchanges and therefore does not accept deposits in yuan, meaning that customers are heavily reliant on clearing houses, i.e third party suppliers. Bobby Lee, CEO of BTC China said that, "We essentially got notice from our third-party provider today that they will discontinue accepting payments for us and new deposits, we're still operating a Bitcoin exchange in China legally, and we're still allowing people to deposit and withdraw Bitcoin, and withdraw yuan."
The whole situation seems to have stemmed from a meeting this week between The People’s Bank of China and 10 of the clearing houses that were dealing in Bitcoin transactions, in which the clearing houses were told they had until the end of January to cut all ties with the virtual currency exchanges. This should not really have been shock news, as just a few weeks ago local banks were given notice that they could not handle Bitcoin transactions. Reasons for the blocks are said to be that China is worried that people are moving savings out of the country and as it attempts to develop its internal economy this is not what they want. In slightly better news for Bitcoin, Emily Spaven believes that this is not the end for Bitcoin and far from it saying, "Underneath all the speculative trading is a robust technology that has intrinsic value as a payment network, offering cheaper and faster money transfer than any other options that exist currently,"