China is intrinsically tied with bitcoin, more so than any other nation. The state has little tolerance for it, that much is known, but can past events give us any insight to the future of this fragile relationship.
As Chinese New Year approaches many analysts are looking for clues as to whether this will affect bitcoin prices. Crypto media has decided it will be bullish and bearish at the same time.
One common theory is Chinese investors will sell off holdings before the holiday to free up spending money which will create additional bearish pressure on markets.
Historical price trends show that whatever happens, this weekend will be a blip in the grand scheme of things.
China: The Bigger Picture
A recent report by crypto trading firm SFOX has taken a deeper look into the tempestuous relationship between China and bitcoin.
The country plays such a major role in the machinations of the world’s leading digital asset. China has a massive OTC market with huge domestic demand, over two-thirds of the network hash power, and many of the world’s leading crypto companies and entrepreneurs.
Back in 2011 Chinese bitcoin exchange BTCC was launched just a year after the first-ever exchange went live. Two years later industry giants like Huobi and Bitmain were founded in China.
In late 2013 the Chinese government banned bitcoin from banks and domestic exchanges but did not prohibit trading or ownership. By 2015 four Chinese mining pools (F2Pool, AntPool, BTCC Pool, and BW.com) commanded over half the hash rate.
Pressure on the Chinese yuan led to a surge in investment causing bitcoin prices to increase at the end of 2016. By late 2017 the regime had banned ICOs and domestic crypto exchanges causing an exodus of companies to friendlier climes such as Hong Kong and Singapore.
In late 2019 president Xi Jinping publically endorsed blockchain technology leading to a 33% surge in bitcoin prices in a couple of days.
It is clear from these few pivotal events that China has a huge influence over bitcoin markets.
The Future of Bitcoin and China
Just like the freedom of information, Beijing wants no part of bitcoin and has made every effort to prevent its burgeoning population using it. With decades of censorship and prohibition, the people are quite adept at subverting their totalitarian rulers and can easily get BTC as ownership of it is still perfectly legal in China.
China is leading the world in the central bank digital currency race with Europe and the rest of the world playing catch-up. The US hasn’t even got off the starting grid as the current Administration is more focused on enriching billionaire bankers even further.
China’s motives are centered on more surveillance of monetary flows and control over the finances of the population. However, a CBDC will bring crypto money to the masses in a country that is already streets ahead for digital and mobile payments.
A younger generation, wary of failing banks and dictatorial rulers, will want more freedom and bitcoin provides this. China will maintain its influence over bitcoin markets for some time but it may not be all bad news, demand is unlikely to be diminished especially if the economy is starting to feel the pinch.
As we have seen before, weaker currencies strengthen the safe haven narrative, and the Chinese are experts at investing where it counts.
Will China’s influence over BTC strengthen this year? Add your comments below.
Image via Bitcoinist Media Library
