US Crypto Market Stabilizes Amid China Crackdown

Despite reports of a crackdown on Bitcoin by Chinese regulators, the cryptocurrency market remains unfazed. Traders believe these actions are peripheral to the coin's future success and potentially temporary. While Chinese exchanges have voluntarily halted trading between Bitcoin and Yuan, and further government intervention may occur, Bitcoin has experienced a 0.72% increase over the past week.

Cryptocurrency Market Unfazed by Chinese Regulatory Crackdown

New York, NY: Despite reports of a regulatory crackdown on bitcoin by Chinese authorities, the cryptocurrency market remains largely unperturbed.

On September 14, news emerged that Chinese regulators were demanding exchanges to cease bitcoin trading, triggering an initial sell-off that briefly pushed the price of bitcoin below $3,000 for the first time in over a month. However, within hours, bitcoin had recouped most of its losses.

Since then, several of China's largest cryptocurrency exchanges, including OKCoin and Huobi, have announced their plans to voluntarily halt bitcoin-yuan trading. Furthermore, reports of additional government interventions have surfaced.

Despite these developments, bitcoin has gained nearly 0.72% over the past week, as investors and traders appear to be disregarding the recent headlines as peripheral to the long-term prospects of the digital currency.

Traders Dismiss Concerns

Josh Olszwicz, a bitcoin trader, explained to Business Insider that the markets are overlooking the news from China because it has no bearing on the underlying blockchain technology of bitcoin.

"If it doesn't affect the protocol, then it's not a real problem," Olszwicz emphasized. "The bitcoin cash shakeup was much more worrisome from my perspective, but even then the core bitcoin protocol remained unaffected."

Olszwicz's comments underscore the growing belief that the success of cryptocurrencies is not contingent on regulatory approval or support from any particular country.

"Countries can try and ban bitcoin all they want, but people will still use it if they need and want to - the protocol doesn't need government acceptance," Olszwicz stated.

Temporary Regulatory Reaction

Sebastian Quinn-Watson, of Blockchain Global, a bitcoin exchange operator, views the crackdown as a temporary response to the explosive growth of the cryptocurrency market this year.

Quinn-Watson believes that regulators were alarmed by the proliferation of initial coin offerings (ICOs), which have raised over $2 billion this year, and felt compelled to intervene to prevent a potential market crash. On September 4, Chinese regulators declared ICOs illegal.

"By stepping in so dramatically and not allowing what would have been an almost inevitable crash in the crypto market, the regulators acted to ensure that investors did not irrevocably lose trust," Quinn-Watson said.

Quinn-Watson, who has had extensive discussions with regulators, anticipates a gradual shift in the regulatory stance.

"We do not see this halt as being long term," Quinn-Watson emphasized. "Innovation is a significant pillar of China's economic growth plan. Fintech as a subset of innovation is a very important part of this pillar. Blockchain is an important part of this mix. The PBOC has teams of developers building out use cases for blockchain."

Quinn-Watson disclosed that regulators are considering allowing companies to conduct ICOs through a government-supervised pilot program.

China's Declining Influence

Another factor contributing to the muted market reaction is the declining dominance of China in the cryptocurrency market. According to data from CoinDesk, bitcoin trading volume against the Chinese yuan has plummeted from nearly 90% at the end of 2016 to around 10-20% for much of 2017.

"Many traders felt that China is becoming less of a market leader for bitcoin trading," Greg Dwyer, head of business development at BitMEX, a bitcoin mercantile exchange, told Business Insider.

Dwyer pointed to the recent milestone achieved by BitMEX, which traded over $1 billion in notional value in a single day, as evidence of the strong market demand for bitcoin.

Differing Perspectives

Despite the optimism expressed by Quinn-Watson and others, not all experts share their view. Jim Stent, author of "China's Banking Transformation," believes that China's crackdown is permanent.

"I see the crackdown on bitcoin as part of this larger multi-agency program to reduce financial sector risk, which will unfold over months and probably years," Stent said. "I do not see risk reduction as something temporary, nor do I see the bitcoin crackdown as temporary."

Conclusion

The cryptocurrency market's resilience in the face of Chinese regulatory measures highlights the growing maturity and diversification of the industry. While regulatory uncertainty will likely continue to create volatility in the short term, the long-term prospects for cryptocurrencies remain promising.