China Launches Bitcoin Crackdown: PBOC Will Probe Abnormal Investor Behavior "And Rectify Misbheavior"

Tyler Durden's picture

Having long been advocates of Bitcoin (ever since Sept. 2015 when it traded at $230) for the simple reason that we were confident the digital currency would eventually become China's favorite means of circumventing capital controls - precisely as has transpired - two months ago we warned that the unprecedented surge which made bitcoin the best performing asset in the past year with a 5x return, may be ending as "China Prepares To Impose Curbs, "Capital Controls" On Bitcoin."

Since then, and especially over the past week, China has launched a series of incremental steps designed to do just that, which culminated on Friday when China's central bank issued a statement calling the changes in the virtual currency "abnormal", and said authorities have required the trading platform to operate in compliance. They urged the platform to "probe investors' behavior and to "rectify misbehavior."

The statement hit shortly after China FX regulators, SAFE, said it would begin scrutinizing fund outflows via Bitcoin, as China sought to close this final gaping capital outflow pathway.

Furthermore, according to China Daily, China's financial services authorities required major executives of the Shanghai-based bitcoin trading platform BTCC on Friday to "rectify misbehavior in the trading of the virtual currency", without clarifying precisely what this means, and to raise awareness of risks as the value of bitcoins experienced wild fluctuations.

China's mass speculators flocked to the bitcoin market in recent days in a bid to gain from its fast appreciation, which rose 200% in 2016. However, after rising in near-exponential fashion over the past few weeks without any corrections, Bitcoin's value fluctuated by more than 30 percent within the past two weeks as concerns of Chinese interference first emerged and were then confirmed. .The statement said authorities would like to reaffirm that the bitcoin as a virtual currency which cannot and shall not be regarded as currency in circulation.

* * *

It is unclear if the PBOC has successfully burst China's latest bubble: According to data from the Shanghai-based bitcoin trading exchange, BTCC, more than 100 new investors started trading the virtual currency in the past three days, a fast growth compared to some 20 new investors before October in 2016.

"This trend shows that the bitcoin market's appeal has been rising to a new level," said a market review by BTCC dated Jan 4.

Feng Xin'an, 43-year-old sales manager with Shanghai-based Maoxin Trade Ltd, said he invested some 135,000 yuan ($19,515) in the bitcoin market as he regards bitcoin as a "haven asset".

"The young generation, like my son and his friends, love to pay with digital currencies. Their demand for bitcoin can grow further, as I observe," he said.

Meanwhile analysts continue to warn that bitcoin is not a tool that "guarantees" yield, and warn new investors who have limited knowledge, that entering the market blindly could be risky.

"Investors should always remember that bitcoin lost more than 75% of its value in 2013. We do not recommend it as a long-term investment tool, particularly because of compliance concerns," said Zhang Yufang, investment adviser with Shanghai Shangding Investment Consultancy.

Then again, we are talking about Chinese bubble blowers: a legendary class of momentum chasers who will take any trend far beyond the level of max pain before allowing it to burst in a spectacular supernova of selling, in which the slowest sellers end up suicidal, either literally and metaphorically, before moving on to the next pre-bubble asset.

Following the PBOC statement, Bitcoin tumbled as low at 5,555 Yuan, or just above $800, before rebounding modestly as a new batch of BTFDers emerged.

 

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D Nyle's picture

Hell Trump's not even in office and China's losing it

Rich Stoehner's picture

China loves bitcoin, they just hate their citizens using it.

This Might Hurt's picture

I don’t think there has been anything significant to come out of this “crackdown”, and there is still a place for bitcoin in your crisis portfolio, but we do need to have a bitcoin reality check once in a while, the Jamie Dimon imbedded video in this story is worth a watch.  I hate the guy but he makes some good points. 

remain calm's picture

You know BTC is something to own when governments are trying to prevent you. I will sell my token coins when the governments encourage me or make it easy to own. 

LawsofPhysics's picture

Or force you to pay your taxes with it!

38BWD22's picture

 

 

fiatleak.com boxscore (15 minutes of recent BTC trading, total almost 29,000):

China: 26500 BTC

USA: 1950 BTC

Russia: 4 BTC

Brazil: 2 BTC

S. Africa: 1 BTC

Europe: 1 BTC

Yes, I know that fiatleak has its issues (double counting, trading volume on exchanges only, etc.), but it is still a useful gauge of measuring BTC activity.

* * *

The China crackdown does not appear to have affected trading today.

* * *

If the price of BTC goes down further today, maybe I'll buy some.

Yesterday I bought gold.  

:)


RAT005's picture

Ask yourself this:  Would you give your car to someone for the market price of bitcoin?  Would you give your car to someone for the market price of gold or silver?  I realize some people would say yes to all of them, they believe in BTC.  But if you won't sell $10,000s of thousands of dollars of your stuff for BTC, then maybe BTC isn't real to you.

And then maybe the next question is are you comfortable putting BTC and gold/silver in a 10 year time lock.  So it's not a trading game vehicle, would you trust it to sit for 10 years?

BTC is not real to me.  I don't doubt its perceived value goes up and down, but that doesn't make it real from a money perspective.  It's just an interest for now that may or may not be of interest in many years.

jmack's picture

it is a transfer medium. as this spike demonstrates.   people were transferring thier yuan into other assets, be that dollars, or gold, or real estate, and bitcoin was the method they used to move it across borders.   enough did it at once, to move the price up substantially,  and they promptly left the instrument, and it has dropped back down.      their is speculative pump and dump intermixed with this, and a million other motivations overlayed, but the signal in the noise, is asset transfer thru the medium of bitcoin.

MANvsMACHINE's picture

Governments are acknowledging BTC which legitimizes it. Price is volatile but if you have some spare change to put at risk, it's worth owning a few to avoid the woulda shoulda coulda if it does what some believe it will do.

If it crashes and burns, no great loss.

malek's picture

Really, that's your deciding reason?
I mean governments have been acknowledging a lot of obvious bullshit, and some less obvious too...

The Saint's picture

Bitcoin just feels like a penny stock with no company behind it to me.  It's totally worthless.  I see the bitcoin market figuring this out at the first hint of a western country beginning to slap it down.  And, I fully expect that to happen in the not too distant future.

 

jmack's picture

I suspect your analysis of its worth is fraught with bias's and ignorance.

 

     Why dont you go earn a living in china for a decade, or venezuela, or india or almost any african country,  or any central american country, or any south american country, or any middle eastern country, or try to earn a living in a unapproved government  industry in america, such as a gun shop, smoke shop, cigar shop, liquor store, legal weed stores/farms/supplies (the list of unapproved government activities is growing fast, soon to include the sales of liquids containing sugars) and get frozen out of the american banking system...   then get back to me on the worth and utility of bitcoin and alt coins.  you also are probably unaware that there are companies that allow you to move bitcoin to usd prepaid cash cards.  or to purchase gold in vaults in europe or singapore, all with transaction fees that are cheaper than your atm card purchases.

 

     As documented in the durbin amendment post on ZH,  the credit card companies are charging flat rate fees that make micro purchases extremely expensive, but if you can buy with bit coin for .02% transaction cost, do you think a mom and pop coffee/donut shop might see the value in accepting bitcoin, when they can move it to cash or gold in 30 minutes or less, automatically, bypassing the fees of US banking?

 

     So please excuse me if I take your opinion for a bit less than informed.

The Saint's picture

Please.  Your facts are just wishes.  Bitcoin has zero value and at some point will revert to that value.  For the moment it is a vehicle for a few but that won't last long.

 

jmack's picture

at some point, the sun will explode, and you will be correct, assuming of course that humanity has not moved out of the solar system....

 

as for facts:   https://bitplastic.com/

https://www.vaultoro.com/

https://en.bitcoin.it/wiki/How_to_accept_Bitcoin,_for_small_businesses

http://www.cnn.com/2015/02/17/business/bitcoin-africa-unbanked/

Draybin Deffercon III's picture

If Bitcoin wants to be $903.00 today, I am okay with that. I am okay with anything that Bitcoin wants to be. Even if Bitcoin wants to be outlawed. It's all good.

Prisoners_dilemna's picture

Bitcoin is often referred to as "Honeybadger".

Time will tell...

In the meantime I present Honey badger

Draybin Deffercon III's picture

Bitcoin will be banned by western governments and central bankers around the world. And that will be Bitcoin's true finest hour... when it defeats all world governments and bankers fighting from the hills, as a rebel viral currency.

Draybin Deffercon III's picture

Let's talk about BITTORRENT for a moment shall we? Why have governments not been able to stop Bittorrent? Even though it has totally decimated their Hollywood and music propaganda machine?

You do know what Bittorrent is right? Oh sorry, you're a bunch of old geezer fuckwits that totally missed that one too. And you have no cue about anything else technology related either.

adr's picture

Bittorrent was/is an exchange mechanism to transfer files. A torrent by itself is just a small piece of a file that is traded and compiled to complete a whole program/movie/image. The advantage was that individual parts of the end file could be downloaded from multiple locations at once. If one torrent site was blocked, others would allow you to complete your file. 

You did not have to pay for a torrent to transfer or trade your file. 

Bitcoin has nothing in common with Bittorrent other than Bit and transfer through the Internet. But instead of a free medium of transfer, Bitcoin must be bought. 

If you are trying to claim that Bitcoin is similar to Bittorrent then you are saying thay Bitcoin is nothing but a transfer medium and therefore worthless. Just like a torrent trading program. You do know that there are hundreds of torrent trading programs that do the exact same thing as Bittorrent, just that program was the most popular. 

If your goal is to transfer Yuan to dollars,  the medium doesn't matter nor its value. All that matters is the ability to facilitate the transfer. If Bitcoin is shut down or becomes too regulated,  another altcoin will take its place because it was never about increasing the value of the exchange medium. 

If you want to transact in Bitcoin,  I'm not changing my prices 10,000 times a day. What was .07 last week will be .07 next week regardless of what the Yuan/Bitcoin rate is because my goods would be priced in Bitcoin. To change my prices because you claim your Bitcoin is worth $1000 and therefore should buy more is as ridiculous as saying $1 billion Zimbabwe dollars should be worth $1 billion American dollars. If Bitcoin is really a currency instead of an exchange medium. 

 

Draybin Deffercon III's picture

I am not even going to recognize the premise of your argument that Bitcoin's only inherent value is to transfer from one fiat to another nations fiat currency. That might be true and the dominant usage of Bitcoin *today*, it will not remain that way.

And both Bittorrent and Bitcoin share a common P2P network structure. That is what gives them their amazing power and invincibility. Anyone on Earth can chose to open up those ports on their networked device and run those protocols.

Golden Phoenix's picture

No, what will happen if someone wants to conduct a transaction in bitcoin is they'll go elsewhere and you won't get the sale.

Deplorable's picture

Bitcoin is the easiest way to hide your assets from the prying eyes of the taxman.   All you need to do is convert everything to Bitcoin and put it on a micro sim card to carry it across the border. Convert it back to your preferred physical asset at your destination, and you are good to go.  

As a long term investment, it could easily kill your portfolio.

Draybin Deffercon III's picture

First part of your comment is correct. You could even hide your wallet file inside other binary garbage and then clean the file later to further conceal it.

But how would Bitcoin "kill your portfolio"? The only thing that poses a conceivable threat to Bitcoin is another altcoin. And so far, after 8 years we really haven't seen an altcoin that:

* offers any wow factor that Bitcoin doesn't have
* does anything so much better than Bitcoin
* offers any real increased security, speed or ease of use

SimmerDown's picture

The only thing that poses a conceivable threat to Bitcoin is another altcoin

I wouldnt be so sure about that with all (at least USA) Internet traffic flowing thru a few government controlled Kill Switch chokepoints.  

asierguti's picture

And somebody deletes that binary garbage and... it's gone.

 

People said the same things about the Mississippi Company, the South Sea Company and Tulips. But yes, this time it's different, why not.

Draybin Deffercon III's picture

You really have no fucking clue what you're talking about do you?

Idaho potato head's picture

That is exactly the way I view it. 

SimmerDown's picture

@jmack an excellent synopsis and characterization of bitcoin.

Bitcoin sometimes reminds me of the Tulip mania

HRH Feant's picture

That makes sense as a method to avoid capital controls and move money to another location out of the country. Bitcoin is the perfect vehicle to quickly, and cheaply, transfer assets to another country.

Draybin Deffercon III's picture

Would I give my car to someone for Bitcoin at today's price in BTC? Absolutely, the Bitcoin will increase in value 1000x fold from here and the car will lose almost all of its value eventually.

Nobody For President's picture

Did you say silver?

I have a 2005 Sienna van country car I'll let go for only $4500 silver (or gold). Only 125K country miles on it...

mmanvil74's picture

Yes I would sell my car for its market value in bitcoin, why wouldn't I?

All these people who cannot get over the idea that bitcoin is not "backed" by anything really give my head a spin.

Bitcoin is "backed" by its usefulness.  What is Google "backed" by? Is it backed by its office buildings (hard assets you know), or is it backed by its usefulness to society? After all, that search engine algorithm is just a string of ones and zeros...

What are US Dollars "backed by"? Their usefulness, nothing more.

If you don't see any usefulness for bitcoin you are blind. If you think anything that has value must be "backed" by something tangible you are a fool.

That's not to say Bitcoin is worth $500 or $1000, it is worth what the market says it is worth based on its usefulness.

I don't blame people for choosing not to speculate on the value of bitcoin, but to use this "not backed by anything" argument is pure idiocy.

Suleyman's picture

Lets face it - the value is not in the money itself, but the prospect that you can (possibly, probably, but not certainly) trade it for something in the future. The value of money depend on the other people. You can not get away from that, and you don't want to. It is a trait that humans have, and no other animals that I know of. It is of immense importance for value creation. It enables ownership of future goods, stuff that maybe don't yet exist, but that you will need to support your life.

Bay of Pigs's picture

Those stats illustrate perfectly how completely out of whack BTC worldwide trade is. Where is India, Japan, Australia, the Arab nations, and the rest of Asia? Fact is, aside from the US, China trade Is very close to 100% of all Bitcoin activity.

https://www.bloomberg.com/news/articles/2017-01-06/bitcoin-buyers-eye-be...

38BWD22's picture

 

 

Indeed.  Bitcoin is playing in its own universe.  EVERY time I look at BTC trading, it is always over 95% China.

* * *

Bitcoin is voluntary and not yet controlled by governments.  The lack of BTC "infrastructure" (ways of buying & selling it) are not in place in most parts of the world.  Not even the USA (it is somewhat hard for me to get BTC without paying 13% or so premium).

no ice's picture

Why are you and everyone else so eager and accepting to be "controlled" by your government?  People are spewing the "government control" meme like they want it.  Government cannot "control" Bitcoin and that is the beauty of it.  Just like another poster said, all they (government/ BoC) are doing is "lighting a fire under Bitcoin." Buy now while it's under $1,000, even if you only buy $100.00 worth.  You'll be glad you did.  

My experience in buying Bitcoin is not the same as yours.  It's simple to buy. If you have a computer you can buy it.  It's way easier than going out to buy physical gold and silver, but you should still buy those, too.  I have NOT paid a 13% premium.  Who wanted to charge you a 13% premium?

38BWD22's picture

 

 

It's now much harder for me to buy BTC, except at BTC ATMs that typically charge ~13% (I'm in the USA).

It is now harder for me to buy via credit/debit card (= via computer) which did charge MUCH more reasonable 1% or so.  And localbitcoins doesn't work well in my city, it's difficult to set up meetings do a trade.  Just my experience.

* * *

Don't get me wrong, I like BTC, even if I am not an expert.  I like the fact that you can load it up on a hardware device (or even just leave it in the cloud) and transfer LARGE amounts when traveling.  You can mostly cover your trail in buying BTC by using such services as bitmixer.io.

But Peru, alas, has almost ZERO ways to use BTC.

Draybin Deffercon III's picture

As for Bitcoin being banned in America? SOME PROBLEMS:

* The Philip Zimmermann PGP case from the early 1990s that basically legalizes computer encryption technology for people to use.

* The deCSS case that established written computer code is free speech. People began wearing T Shirts with deCSS code printed on it.

* Judges ruling that it is not the job of ISPs to be monitoring what their customers are doing so they can be sued at some point in the future for copyright infringement.

SILVERGEDDON's picture

Oh yeah, nerds wearing T-shirts trump the Fed and Dot Gov. 

I am sure they will immediately change their plans to remain the dominant currency system for you all and Bitccoin.

You are on a Wayne's World bender today, hoser boy.  

Draybin Deffercon III's picture

I suspect that most of the people talking shit about Bitcoin here have never actually owned any Bitcoin, have never used any Bitcoin. And it wouldn't surprise me to learn a lot of them are bad guys here being payed to post this tripe.

SILVERGEDDON's picture

More like we don't need to drink your Jim Jones Canadian tax evader Bitcoin koolaid any more than we believe Uncle Sam and Justin Trudeau have our best monetary future in mind, dip shit.

Draybin Deffercon III's picture

What do they have to do with Bitcoin you fucking moron? They are powerless against Bitcoin.

SILVERGEDDON's picture

Keep talking your book - government has other ideas. China is just first on the list. 

Draybin Deffercon III's picture

First on the list to try... and fail.

buckstopshere's picture

Bitcoin bubble will be fully popped below $230, giving up all gains since August 2015.

Much better bargains ahead if one is okay with being on a permament FBI and NSA watchlist. They can trace Bitcoin users using end to end correlation attacks and other methods of surveillance, not just Internet and phone data.

Draybin Deffercon III's picture

Suppose they did track them? And then what? How do you prove in court someone is still in possession of these Bitcoins? Not only that, but how would you make those laws retroactive to when Bitcoin was a legal currency?

Face it, every which way you look at this... government loses against Bitcoin.

buckstopshere's picture

End to end correlation attacks are one way of proving the identities of those involved in Bitcoin transactions.

The recipient of Bitcoin may also report his receipt and sale of Bitcoin to the tax authorities, thereby revealing the identity of the initial owner.

https://www.irs.gov/pub/irs-drop/n-14-21.pdf

Draybin Deffercon III's picture

You don't address mixing services and you didn't answer my questions about how they prove someone is still in possession of Bitcoin? If someone asked me if I was in possession of (and had passwords for) every .txt or .gpg file I had in 2014 I would honestly not be able to tell them.

buckstopshere's picture

You would need to hire a lawyer first before making any sort of statements.

This will cost money.

Too many hassles.

By the way, mixing services suffer from end to end correlation attack vulnerability.