On Friday rumors surfaced that China is planning to ban local crypto exchanges. This rumor created a wave of FUD and $btc price dropped sharply (~from 4650$ to 4000$). Drop was even larger on Chinese exchanges (~down to 3400$). Unfortunately I don't have a crystal ball to predict the future, but I can analyze this rumor and see if there is any line of logic that could lend it credence.
First of all lets look at the events preceding this rumor. Yes china cried big bad wolf many times before and nothing serious followed, but things have fundamentally changed by ICO ban: This is a signal that wider regulation is coming in crypto space within China. Ruling party has your full attention and things might get ugly before they settle.
Why would China ban ICOs first and then exchanges? It seems counterintuitive, but some explanations come to mind: a. to avoid market panic, b. increase chances of ICO refunds c. ICOs don't need exchanges, so banning exchange doesn't automatically ban ICOs, albeit makes things harder.
Now lets look at how China might benefit from this:
- China has always been wary of capital flight. There are controls on foreign money transfers via banks: upper limits and even manual controls of wire-transfers are not uncommon. Suspicion that bitcoin contributed to China's capital outflow problems has been noted throughout 2016-2017, and exchanges are central to those fears.
- Decrease internal consumption and thus encourage exports. Electricity costs are cheap, hardware is cheap, labor is cheap, China is heaven for mining. By removing inner consumption market China is effectively encouraging export of $btc and inflow of USD boosting trade surplus.
- Crypto exchanges don't really provide any economic value, they are the means of money transfer from one party to the other. Local exchange means someone in China is winning and someone in China is loosing, zero sum economic game. Mining on the other hand creates value.
For this reasons I think China stands to benefit from ban on crypto exchanges, but will continue to provide hashing power.
Hahaha....i don't believed anything that 'made in China'....especially anything to do with cryptocurrency.
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STOPI don't agree with this.
Please provide arguments, lets have a discussion.
Up to you to provide arguments since you are the one saying that crypto exchanges don't provide any economic value. I have never heard anyone suggest that before. Seems obvious that anything which generates economic activity is beneficial.
I've stated the reasoning already: in an economic activity where one needs to loose for the other to win value is not created, it is being transferred from one hand to the other, net result to the overall economy is 0. I give you 100$ bill, you give 100$ to your friend, he gives it back to me, no value was added to the overall economy.
Now you can say that exchanges have positive externalities and you would be correct. But you'd have to analyze those externalities to have an opinion.
Your turn.
Completely incorrect assessment of the situation.
I'm still waiting for an explanation.
Keep waiting.
I'm still waiting for you to make sense. We don't always get what we want.
Further I find your flippant tone rather rude so I can't be bothered with this anymore. I did try but sometimes you need to cut your losses.
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