China's crackdown will create opportunities elsewhere, specifically Hong Kong
Yesterday, China officially announced that local cryptocurrency exchanges will be shut down by the end of September.
However, markets didn't take that news particularly hard as Bitcoin and the entire altcoin space rallied hard. With some coins showing gains of roughly 20-30%.
Behind that strength was probably the fact that OKCoin and Huobi were granted an extension to close down their exchanges until the end of October.
Those two are some of the largest exchanges in China and the fact that they won't be forced to sell everything all at once, like many were fearing, was seen as good news by market participants.
Also, the fact that the exchange shut downs don't appear to affect the OTC Bitcoin markets in China as well as the peer-to-peer exchanges likely tended to soften the initial blow of the China exchange crackdown news.
Furthermore, China's Bitcoin trading volume "only" accounted for roughly 15% of all cryptocurrency trading over the last 6 months, which means the worst case scenario didn't mean the end of the line for Bitcoin and the rest of the crypto space and as cooler heads prevailed, that was likely realized.
*Something to take note of is the fact that the mining of Bitcoin seems to be continuing in full force out in China which leads some to believe that this "ban" is only temporary.
It's not all bad news!
One person's trash is another person's treasure!
As we know, the current Bitcoin industry that exists in China is mostly going to be shut down, but it likely isn't just going to die.
It's going to branch out and seek a new home.
One likely landing spot is Hong Kong, according to Leonhard Weese of the Bitcoin Association of Hong Kong.
Specifically, Weese noted that China's restrictions on bitcoin trading and usage will drive businesses to Hong Kong and also to nearby countries like Japan and South Korea.
Both of which have welcomed Bitcoin and cryptocurrency with open arms.
"People in China will be more careful about marketing these events, and a lot of that marketing activity will come to Hong Kong in the form of conferences and communities."
Which will also likely be a boon to their overall economy.
Why Hong Kong?
Well, proximity is a big one, probably the main one actually. However, the next most important factor is Hong Kong's regulatory friendly environment for Bitcoin and blockchain startups.
So far, even with their friendly stance towards Bitcoin and cryptocurrency, they have only managed to create one major cryptocurrency exchange in the last 3 years, Bitfinex.
That is somewhat surprising since they have been praised for being a regulatory friendly region since early 2015.
However, Weese (among others), think that with the Chinese crackdown we could see explosive growth with Hong Kong exchanges as well as other cryptocurrency related businesses.
Conclusions:
It's impossible to know how long this Chinese crackdown on cryptocurrency will last, or even if it will be permanent.
However, we do know that if it gets squashed in one place it will seek out a new home.
Especially since may of the neighboring countries have taken such a friendly stance regarding Bitcoin and cryptocurrency.
Hopefully the faster it gets adopted in these other places it forces China to reverse course and reconsider their current decisions.
Only time will tell I guess.
Stay informed my friends.
Sources:
https://cointelegraph.com/news/chinas-stricter-bitcoin-regulations-will-strengthen-hong-kong-market
Image Sources:
https://twitter.com/drivinsouth65/status/519414867984646144
http://www.startupshk.com/hong-kong-bitcoin-startup-alitobit-will-launch-3-atm-locations-april-2014/
Follow me: @jrcornel
Yo ,
Thanks for the great content
I dont think there is a chance in hell that China walks away from Bitcoin or other crypto currencies. China is one of the largest miners of BTC and notice that wasnt affected. Why not? It is because the Chinese gov't has their hand in it. Many companies operate as a quasi-government entity. At the end of the day, if the Chinese were serious about eradicating BTC, they would have crushed the miners.
This is a train that is too strong to stop. There are too many people all over the world with BTC in their hands...many of whom are not letting go. Dimon's comments this week lead me to believe that the bankers are accumulating also. 16M coins does not spread to far when you really think about it.
So, if China is out of the mix for purchasing BTC in their country, someone will pick up the slack. And dont worry about demand, a ton of Chinese money is already out of the country...the elites didnt sit pat and wait for the crackdown on outflows...they got the money out.
I completely agree with you, I have been living in China for 15 years, if the government really wanted to close down Bitcoin completely it would already have been done, and they would have started with the miners. Instead there are more and more news of even bigger mining farms openi which just tell me one thing - China would not give up to miss the crypto train
Bitcoin without China is like boxing without Mexico...
Hahaa that's a good one ☝️
It is good to get an insider's view.
What is your take? I think it is much ado about nothing. China isnt closing the exchanges to clean things up...they are closing them to control the situation. I would not be surprised to see China open up a state run exchange.
Hello there ! A friends brother did IT/computer work at banks in china ( I believe it was THE MAIN Bank of China) 10-15 yrs ago. I told him to tell his brother to "watch out, he might just disappear" least he stumble on something that they don't want the world to know about. Within a year, the bank announced that they had lost or misplaced millions (or billions). I will probably never trade the forex market with china, I just do NOT trust them. I am not a typical china bashing american, I just have read to much history and don't take anything they say at face value. Imho this news is nothing short of the reverse of a pump and dump scheme. They appear to be dumping when in reality they are buying on the self created dip. As YOU know they are not stupid, I believe they are setting themselves up to try to control the market. imho they have the gold to do so. I believe BTC is their new "silver" market, and anyone familiar with that history should take note of their mentality and the processes they engage in. Deception is their main tool of aggression imho, as stated in the Art of War, for good reason.
I have to say, I have never or will ever live there, so my opinion is pretty much a moot point ...
Btw Dan, you don't have a brother named Mike do you ?
Read More, Reason More ... JTS
I have no brother named mike hehe Well In china it's sometimes a good thing to fly a bit under the radar. But I think all foreigners living here will agree that as long as you don't do anything bad you are very well treated. Silver has been a bit of the akilles heal for China as the market is completely manipulated by America. Maybe this is a chance for them to get control over he silver market. I definitely see that as a valid possibility!
Actually I was referring to the history of china and silver when the Britts introduced it to china ...long ago ... very interesting history, in fact that's where the term china (as in expensive dishes) came from ...
You are absolutely right, this struggle has roots long back in the history for sure! I think China remembers it very clearly and as they can plan decades at a time with their communist structure I think they already have a future painted where China is by far the most powerful country, if that ever would happen they sure will need to adopt cryptocurrency
upvoted and following btw !
Followed back buddy !
Cryptocurrency is unstoppable, that's all I can say.
The first picture tells everything. The dark times will be a short period (being ended at the time I write, apparently).
I haven't looked at the figures but could the rally be down to the Chinese trying to get as much fiat as possible into crypto before the exchanges close?
The Chinese govt is shutting down exchanges because they offer an easy way to get round capital controls.
The Chinese people who are buying crypto may be trying to get money into crypto with a view to reclaim it when the ban is lifted, or maybe reclaiming it overseas! Any thoughts?
Time will tell. We'll wait.
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Following for updates,,,
Great article! This exactly explains why this type of control will never work and is exactly the reason people are looking for alternatives. We have HAD ENOUGH!
Can't arrest an idea.....indeed
Thank you very much for reassuring us in these turbulent times. :)
15% of the total crypto users are from Chine. So, it's a fact that this crackdown hurts the crypto market but it's true that it will create new opportunities. Blockchain is going to stay. So, this is the right time to buy and hold. Just my humble opinion. Nice article @jrcornel.
STEEM ON!