As Bitcoin has just started recovering from the huge dip it suffered last week after news broke that China will ban all exchanges, there is more bad news on the horizon. And again, it is coming from China.
China bans peer to peer and OTC trading
According to new reports by the Wall Street Journal, Chinese officials stated that peer-to-peer trading would not be tolerated, therefore also banning the OTC (over the counter) trading market. Last week it was assumed that OTC trading will continue.
China may block foreign exchanges - will Japanese volume decrease?
Additionally, there are unconfirmed reports claiming that China is planning to block websites of foreign exchanges and OTC platforms (which would only make sense if they want to stop the money outflow).
After the Chinese exchange ban, we have seen a huge increase in Japanese trading volume, making BTC to JPY the second largest Bitcoin trading pair. This created a sense of relief in the Bitcoin community, because many people believed that Japan can compensate the lost volume from China.
But it is rumored, that due to the Chinese exchange ban, many Chinese traders moved to the Japanese exchange bitFlyer. If that is true, then the volume might just be temporary. With China blocking foreign exchanges, most traders will lose access to exchanges entirely. Especially since China is cracking down on VPN technology, which can be used to circumvent the internet censorship.
Will China ban mining? Would a mining ban cause an epic crash?
After reports of the continuing crackdown on Bitcoin, there are speculations whether China may also ban mining. This would be a serious problem for Bitcoin. While Chinese Exchanges only make up around 10-15% of the overall trading volume, they account for somewhere around 60 to 70% of the total bitcoin hashrate. If news would break that mining will be banned in China, it could throw Bitcoin in a huge crisis. The news of banning exchanges brought down Bitcoin price over 30% while their exchange volume only makes up 10-15%. Now just imagine how the prices would react, if about two thirds of the mining power is under threat of being banned.
One of the reasons why mining is so big in China is based on the low energy prices. Chinese energy prices in China are about 33% less than in the US and almost 80% less than in Germany. This is mainly caused by the large amount of coal, which is China's main energy source.
Here is what Haipo Yang, the founder and CEO of now closed Chinese exchange ViaBTC tweeted regarding this topic:
This would be a serious crisis for Bitcoin... let's hope this will not become reality!