Late last week, a report from Caixin shook the Bitcoin world. According to the state-owned media outlet, China plans to ban all cryptocurrency exchanges. The report was followed by a similar one from The Wall Street Journal, which cited anonymous sources familiar with the matter.
And, initially, the price of Bitcoin plummeted, falling from roughly $4,600 to $4,000. But three days later, the price of Bitcoin (and most other major cryptocurrencies including Ethereum) is rising again.
So what’s happening? Was the report false? The answer is unclear at this point, but the market either no longer believes the report, or it simply doesn’t care.
Make no mistake—China definitely can pull such a move. The country clamped down hard on Bitcoin several times in the cryptocurrency’s history. And the People’s Bank of China recently banned cryptocurrency ICOs (Initial Coin Offerings, or token sales) in the country.
The reasoning behind China’s actions towards Bitcoin is complex, but is mainly driven by the fact that cryptocurrencies are tough to control and can be used to move money out of the country, which does not sit well with China’s authorities.
Banning all crypto trading on exchanges is a far more serious move than the ICO ban. Several of the world’s largest cryptocurrency exchanges reside in China, and the country is neck and neck with the U.S. in terms of Bitcoin trading market share.
In other words, Bitcoin should be plummeting. Instead, it’s rising steadily and sits at $4,320 at the time of writing, meaning that the market isn’t overly concerned about the ban.
There are several indicators that Caixin‘s report on China banning all crypto exchanges might be false or only partially true.
First, even though several days have passed since the original report, there has been no official notice on the matter from the People’s Bank of China. Second, three of the largest exchanges in China—OKCoin, BTC China and Huobi—said on Monday that they haven’t heard anything about a ban from the country’s regulators, at least not officially.
And Bloomberg wrote on Monday that over-the-counter transactions (off-exchange trading) would not be banned, meaning trading crypto would still be possible for whales (informal moniker for entities that own very large amounts of crypto).
While it’s still very possible that China will, indeed, ban crypto trading, it could only be a temporary blow for Bitcoin. Several experts weighed in following the reports, saying the money will ultimately move elsewhere in case of a ban.
Think of the worst case scenario: China banned Google, Facebook & Twitter years ago. They’re doing fine. And they ain’t even decentralized
— cnLedger (@cnLedger) September 9, 2017
When has any ban on anything ever worked btw? There are really only two choices here: embrace crypto or get decentralized exchanges faster.
— Samson Mow (@Excellion) September 8, 2017
When it comes to Bitcoin, China’s authorities are known to change their minds often, and a lot of the time they’ve been ambiguous on what they plan to do. It’s quite possible that the rumors about the ban of crypto trading will stay lingering in the air for a while, without official confirmation or denial. Right now, it appears that even such uncertainty cannot stop Bitcoin in its tracks.
Disclosure: The author of this text owns, or has recently owned, a number of cryptocurrencies, including BTC and ETH.