Bitcoin is making a smart comeback, rebounding back above $4,000 mark from its recent downtrend triggered by the crackdown by Chinese regulators. The recovery is primarily led by the realization that the announcements made by Chinese regulators during the first half of September will not be able to hinder Bitcoin. (Related reading, see: China Halts All Cryptocurrency Exchanges to Curb ‘Risks’.)
Bitcoin was trading at $4,900 levels on September 1, moved below the $3,000 mark by September 14 and is now back to around $4,000 levels. Bitcoin’s price has been reacting to news coming in from China since the beginning of the month. It began when the National Internet Finance Association of China issued a notice on August 30, 2017 on “guarding against risks of financing activities in the name of ICO.”
This was followed by the People’s Bank of China's notice on Preventing Risks of Fundraising through Coin Offering on September 8, 2017. Then came the supposedly "fake" news report by Caixin that read, “Chinese regulators ordered a halt to all virtual currency trading platforms in the country, acting to further rein in risks related to cryptocurrencies, Caixin learned from a source close to regulators.” The situation was worsened with strong negative remarks coming from J.P. Morgan CEO Jamie Dimon who called Bitcoin “a fraud.”
As the dust of panic settled, investors and traders looked beyond the present events — with two broader trends emerging. The first being that this isn’t the first time China has intervened with Bitcoin’s existence in the country. Time and again there have been issues and each time, the cryptocurrency has managed to circumvent them.
In February 2017, major Bitcoin exchanges in China halted crypto withdrawals after pressure from regulators. The Chinese Bitcoin exchanges resumed normal operations, allowing withdrawals after nearly a four-month freeze. Even back in 2013, the government banned financial institutions from trading in bitcoin. (Related reading, see: Are There SEC Guidelines on ICOs?)
The second fact which supports optimism is the decreasing reliance on China to propel Bitcoin trade. In terms of currency volume, the trade now denominated in Chinese Yuan has hovered around 20% over the past couple of months, a steep decline from 90% levels a year back. Currently, data from cryptocompare shows that Japanese Yen dominates 48.8% of the trade volume, followed by the U.S. Dollar (USD) at 32%, the South Korea Won (KRW) at 6.4%, the Chinese Yuan (CNY) at 5.8%, and the Euro at 4.3%.
In terms of exchanges, Bitfinex (BTC/USD) is currently dominating 12.83% of the volume ,followed by bitFlyer (BTC/JPY) at 5.38%, Bithumb (BTC/KRW) at 4.05%, Bitstamp (BTC/USD) at 3.96%, and GDAX (BTC/USD) at 3.8% (coinmarketcap data).
Bitcoin at current prices is up by 300% year-to-date. The recovery in Bitcoin boosted the confidence across the cryptocurrency space, taking the overall market capitalization to $136 billion.
The recovery in Bitcoin's price in the current times will strengthen the overall confidence of the Bitcoin ecosystem and should result in minimising the importance that investors and traders will place on news coming in from China, even in the future.