As of Wednesday, December 18th, it seems the Chinese government has taken the first steps on a crackdown against cryptocurrency. The Chinese government has officially ordered the countries payment processors to stop transactions involving the countries Bitcoin exchanges. Although this doesn’t stop current Bitcoin holders from trading and even selling the coins they currently have this does stifle any additional funds from entering the market. The bottom line, the Chinese will not be buying any more Bitcoins.
So what does this mean? Quite a bit unfortunately, according to bitcoincharts btcnCNY accounted for approximately 46% of the total exchange volume in the Bitcoin marketplace. In addition Chinese investments were largely credited as the catalyst for the nearly 1000% rise in Bitcoin prices that peaked on November 29 at over 1000 USD per Bitcoin. Although markets in other countries have grown significantly since China’s initial interest in Bitcoin losing the Chinese markets will undoubtedly pose a major setback to Bitcoin and transitively all other crypto-currencies.
So is this the End?
Nope, despite what you may have read from panicked investors and forum doomsayers this is not the end. Bitcoin, unsurprisingly, seems to have attracted a large following of the same kind of apocalyptic thinkers that have fueled such doomsday scenarios as the Y2k Bug, Mayan Calendar Apocalypse, and the May 2013 Rapture.
Although the comparison may seem unfair, I think those contemplating the effects of losing the Chinese markets need to remember what happened after the Silk Road bust. At the time the Silk Road was seized by the FBI an estimated 75% of Bitcoin related transactions were done on the Silk Road, a much larger market share than China’s 46%, and a comparably popular doomsday scenario for cryptocurrency. Although the market saw in excess of 40% losses the day of the bust, only a few days after markets stabilized at only a 10% loss.
What does this prove? Bitcoin is more than the sum of its parts, and it has a lot of growing to do still. Cryptocurrency doesn’t owe its recent growth to China, it owes it to an increased worldwide awareness and with only an estimated 60,000 users in the US and much less in many other countries we’re just now scratching the surface.