Bitcoin & China – Sell Rumour, Buy Fact?

It’s been a turbulent couple of weeks for cryptos after 2 sets of news out of China spooked markets. First we heard the Chinese government had banned ICO’s (initial coin offerings – where new coins or tokens are launched into the market to raise capital for a new blockchain based application). Then we heard that they were going to shut down local crypto currency exchanges.

The news took bitcoin (in AUD) from its all time high of around $6200 down to just $5100, its lowest in a month. Ether was harder hit as it is the primary vehicle for ICO’s going from $520 to just $350, again its lowest in a month.

However reports are just emerging now that the largest exchanges in China have not heard a peep from the government and since this has been made public there are reports trading is booming, nearly double that of the US, the first time since Chinese trade has surpassed the US since November 2016. That of course saw a strong price rise whilst bitcoin traded relatively flat in the US. Arbitrage would suggest that can’t last.

Additionally, we’ve heard from Hu Bing of the government backed Institute if Finance and Banking stressing that the government hasn’t “forbidden” ICO’s but rather “paused” them as they assess how to control this unregulated means of capital raising through a licensing program.

Regardless, any dispassionate look at the rise of cryptos over the last month would suggest they needed a little ‘rest’ and the Chinese news certainly facilitated that pull back. The question then is; will the sell off on rumours present a buy opportunity on fact. Maybe critical to that decision is how confident anyone can be on either (rumour or fact) as it emanates from the opaque world of China….