A slew of policies have been introduced to curb the various outflow channels and just the mention of bitcoin had been enough to send prices down 11.0% in one day on January 4 before examinations of bitcoin exchanges pushed it further to drop 13.3% on January 11. The $21 billion pot, accounted for by the 21 million coins (approx.) at $1,000 each, may not be a significant amount, compared to the amount that has departed the country in the past months, but have certainly caught the attention of the authorities. Mixed opinions have been cast on how feasible are controls by the Chinese government but prices certainly seem to be suggesting the worst with panic selling.
For the bitcoin, prices are at present a struggle between Chinese demand and Chinese authority controls. Wednesday’s 13.27% drop mark the steepest dip in percentage terms since January 14, 2015, when prices had fallen briefly below the $200 mark. In the fintech revolution, bitcoin is highly likely to remain a hallmark and stand to benefit in the long run. However, until then, expect developments in the Chinese markets to sway prices.
As things stand, the US dollar still has room to run on the upside which could keep mainland investors peeled for opportunities. The Bloomberg median forecast for the offshore yuan, USD/CNH, sits at $7.20 at the end of 2017 which will be a 4.2% increase from the current traded level at $6.90. Three hikes expected by the Federal Reserve Open Committee (FOMC) December summary of economic projections, if realised, would pile into the pressure upon emerging Asian currencies.
We are not one to speculate on the extent of control that the People’s Bank of China (PBOC) could exert, but according to Bloomberg news, the Chinese central bank have been looking for evidence of violations in their probe on Wednesday and the conviction of market manipulation or money laundering could send bitcoin declining more than the 20% year-to-date loss.