Daily Management Review

Does the People's Bank of China manipulate the bitcoin course?


06/19/2017


China's domination of the bitcoin network looks incredibly troubling for the technoliberarian puritans of the digital currency. Practically, they fear that the concentration of digital power in the world's second largest economy threatens to undermine the democratic character of the crypto currency.



Vmenkov
Vmenkov
Giant Chinese farms, such as AntPool, Bitmain and other massive conglomerates of bitcoin mining, can effectively monopolize control over the bitcoin blockchain.

Despite the stated goal of bitcoin to circumvent the powers of central banks and governments and regain control over the world's money supply to individuals, many observers noted a discrepancy between the democratic aspirations of the crypto currency and the seeming willingness of the Chinese government to maintain and develop the country's bitcoin industry.

Bitcoin Uncensored put forward a theory of manipulation of how the Chinese authorities manipulate the course of the crypto currency: the Peoples Bank of China uses its powers to press hard to manipulate the price of the digital currency in favor of political elites.

According to the theory, mass fluctuations in the cost of bitcoin became clear as early as 2013 and were provoked by the Peoples Bank of China when the authorities prohibited local financial institutions from carrying out operations in digital currency.

In early September of last year, one bitcoin cost $ 100. By the end of November, the price had risen to $ 1,000. Then the price collapsed, it would seem, overnight. The Chinese authorities were accused of falling, which created what was to be a great opportunity to buy.

But whatever the plans of the Peoples Bank of China are, they may have already been thwarted by the collapse of the Japanese exchange bitcoin Mt.Gox, which initiated the "bear market", which lasted until the end of 2015.

Nevertheless, more than two years later, the Chinese authorities again resorted to tough pressure to affect the price of bitcoin when they announced in January that they are investigating the situation with the country's digital exchange markets. After pressure was put on the three largest exchanges in the country (BTCC, Huobi and OKCoin), trading volumes in China declined and the price fell, though not as much as in 2013, creating another opportunity to buy.

Four months later, however, the digital currency rose to unprecedented heights, which was due mainly to the influx of Japanese and South Korean retail investors, who were lured by the promise of exponential income at low interest rates.

Of course, the Chinese authorities have many other reasons to try to control the market. First, the Chinese can use the crypto currency to withdraw their money from China. The Chinese regime has restrictions on the amount of foreign currency that people can buy. But Chinese investors can buy bitcoin in China and then exchange for foreign currency in any amount.

Huge wealth, acquired as a result of corruption, can be safely stored in a place inaccessible to annoying researchers of China. Therefore, China's central bank launched an investigation into bitcoin exchanges in February and threatened to close the exchanges, which violate the rules on currency payments and settlements.

It is not yet clear how much money is moved away from China through bitcoin. Bitcoin-transactions in China are not anonymous, since you must bind the Chinese bank card to your account in this crypto currency.

You can transfer several thousand yuan, but large amounts will attract attention.

And if you have to choose, the Chinese authorities will use the sword of Damocles: "Chinese regulators could crack down on bitcoin, classifying it as a foreign currency, which will limit individual transactions to $ 50,000 a year".

Despite the fact that the Chinese government can easily crush the bitcoin market, it will not do this, as it would allow miners in other countries to usurp their domination - something that the NBK will already be very difficult to cope with. From 50% to 70% of world bitcoin mining operations are conducted In China.

It is already clear that Chinese firms control more than half of the network operations, although the exact percentage is variable, because the miners are constantly competing to process the next block of operations.

Instead of cracking down on bitcoin, the Chinese government effectively supports it, supplying the producers with cheap electric power.

The main companies in the north-west of China are currently granted access to wind and solar energy with its low cost.

The inclusion of computer servers required for the extraction of digital currencies is one of the biggest financial problems faced by miners. The logic of the Peoples Bank of China is easy to find: the more miners work in China, the easier the Peoples Bank of China controls the processes on the world market.

The continuing concerns about the collapse only served the government's good.

After bitcoin fell to a two-week low at the beginning of Thursday, CNBC and several other media found several guilty parties at once: from cyberattacks to new rules that are currently being discussed in the US Congress.

As reported by CNBC, bitcoin exchanges have committed several cyber-attacks this week, which slowed the work of the services. Attacks occurred against the backdrop of how consumer interest in the crypto currency led to increased traffic loads.

Since August 1, the BIP148 protocol will be updated on bitcoin-platforms. The planned improvements should expand the "scale" of bitcoin, which will help future growth, reduce fees and speed up the time of transactions.

Demand for crypto currencies soared in the last few months, after Japan recognized bitcoin as the official currency in April. Other countries, including South Korea and Malaysia, are reported to follow suit.

source: zerohedge.com






Science & Technology

With China Set To Dominate, 1 Billion Could Be Using 5G By 2023

Deutsche Telekom unveils next gen 5G mobile antennas in Europe

Diamonds are now the new gold

Expert Body Says Driving In A Driverless Car In An Inebriated Condition Or On Drugs Should Be Legalized

SEC’s EDGAR database vulnerable to cyber threats

Research Says The Risk Of Severe Turbulence On Planes Will Increase Due To Climate Change

Barclays and CLS Group aim to replace SWIFT with blockchain

Designing Of Cars Being Done With Hologram Goggles At Ford

The Already Surging Cyber Attacks Are Set To Rise Even Further, Says A Study

Chinese to equip smartphones with OLED displays

World Politics

World & Politics

Scholar Says Political Appointees Not As Important As Financial Ones In China For The Economy

An Expected Change In Brussels Could Be Crucial For The Euro Zone

Destroying People Who Wouldn't Help One Of His Bankrupt Businesses Was All Trump Talked About When He Met Him In 1990s: Branson

Russia Is Worried About America’s Unpredictability

No oil contracts with Iraqi Kurdistan: Iraq’s oil ministry

Donald Trump lost $ 600 million during his presidency

Britain puts its weight behind Europe in the battle between Boeing and Bombardier

EU hopes to keep the Iran nuclear deal afloat