The People’s Bank of China, the central bank in the country, stated that it is necessary for China’s institutional and individual investors to take a rational approach to investing in virtual currencies such as bitcoin.
Officials of the Shanghai head office of the People’s Bank of China met representatives of a major bitcoin trading platform in China, BTCC. Bank representatives warned about potential risks in the platform’s operations. They also requested BTCC to fulfil “self-inspection” according to the law.
Representatives of the People’s Bank of China underlined that bitcoin is not a currency and, thereafter, cannot be circulated and regulated as a real currency in the market.
Bitcoin has rallied since early 2015, which is strongly connected with the fact that Chinese buyers turned to alternative assets to struggle against the weakening yuan and take cash out of the nation. However, as far as Chinese officials tightened capital controls, bitcoin community started speculating that bitcoin could become the next target even despite the fact that the total value of bitcoins, $16 billion, is very small compared with most mainstream asset classes in the nation.
While most of bitcoin trading takes place in China, the decision of the Chinese government to tighten capital controls had a strong influence on the cryptocurrency fluctuations. The yuan posted one of its biggest rises on record on Thursday due to strong economic data. As a result, bitcoin price fell from $1,184 to $972. As for the moment of writing, it makes up $894, according to the Coin Market Cap.
“What happened overnight is the yuan strengthened,” says Chris Burniske, blockchain products lead at ARK Investment Management. He explained that the Chinese yuan, that had recently been devaluing, rose 1% overnight.
“As a result, one of the notable things I saw is that Chinese bitcoin exchanges fell from trading at a premium over U.S. exchanges to actually trading at a discount, so there was a drop in demand on the Chinese exchanges,” says Burniske. Chinese bitcoin exchanges typically show higher prices for bitcoin than exchanges in other locations because of increased demand there.
China is not the only factor that has an impact on bitcoin price. Such world events as monetary reforms in India, the economic crisis in Venezuela and the shock results of popular votes in the Brexit referendum, the US presidential election and the Italian constitutional referendum have boosted demand for eight-year-old bitcoin, the supply of which is also curbed by its program.