Bitcoin has dipped below the $4,000 mark for the first time since August 22. A series of negative press in regard to the Chinese bitcoin exchange ban rumors and JPMorgan CEO Jamie Dimon’s comments on bitcoin has led traders to sell, creating a minor correction.
On September 12, bitcoin demonstrated strong signs of recovery from the Chinese bitcoin exchange ban report by Caixin, briefly achieving $4,400 in price. However, within hours, bitcoin fell back to $4,250, struggling to recover beyond the $4,500 margin.
As many prominent analysts, bankers, traders and investors including former JPMorgan executive and head of global macro Alex Gurevich stated, Dimon’s comments on bitcoin and his description of the cryptocurrency as a “fraud” was completely baseless and illogical. Through a brief statement, Dimon demonstrated his lack of knowledge in cryptocurrency and the market, triggering controversy and harsh criticism from experts like Gurevich.
Blockstream CEO Adam Back also noted that it is unlikely Dimon had any impact on the price and that the market is simply worried about the future of exchanges in China.
“I doubt Dimon had any impact. Reaction is just china. I’ve been buying the ‘china bans bitcoin’ dip every time, each time move is smaller,” said Back.
But, bitcoin has struggled to sustain its upward momentum for the past week due to the potential ban or suspension on Chinese bitcoin exchanges and trading platforms. Although China only accounts for around 15 percent of global bitcoin trades, it is still a major exchange market behind US and Japan, and investors have expressed their concerns over the state of the Chinese bitcoin industry.
Almost immediately after the report of Caixin and other Western mainstream media outlets were released, OKCoin, Huobi and BTCC, the three largest bitcoin exchanges in China, reassured users that they have not received any new directives from the country’s central bank, the People’s Bank of China (PBoC). More importantly, the three exchanges told their clients that they have been closely cooperating and collaborating with PBoC and local financial regulators to create a more transparent industry and market for both the government and investors.
In a purely logical standpoint, it is highly unlikely that PBoC and local financial regulators will risk eliminating all of the regulatory frameworks, systems and policies the Chinese exchange market and the government have established since November of 2016. From the government’s viewpoint, Chinese exchanges have complied to every single request and demand made by PBoC, showing their intent to be well regulated and establish an efficient relationship with the Chinese government.
On September 13, Jihan Wu, the founder of Bitmain and an influential figure in the Chinese bitcoin industry, stated that the government is likely planning a licensing program for Chinese exchanges. He suggested that the rumor on bitcoin exchange ban likely referred to the suspension of exchanges operating without licenses. Wu further emphasized that if the suspension on unlicensed exchanges goes through, it will not be any different to the approach of the US and that trading platforms can simply obtain a license to operate again.
“Bitcoin is not banned in China, but only Bitcoin exchange business is about to be banned(according to rumor). None of the Bitcoin exchanges in China has the licenses that should be required for order book exchange. Such law is older than Bitcoin. Some established China Bitcoin exchanges stop operation right now does not mean that they cannot open again once with license. If some Bitcoin exchange operates inside U.S. without licenses for years and later is asked to stop operating. Is it U.S banning Bitcoin?,” said Wu.
Dimon’s comment may have triggered a minor panic sell-off in the US exchange market and the exchange ban rumor initiated by Caixin may have led to a minor correction for bitcoin. In the upcoming weeks, as PBoC offers their official statement on the matter, bitcoin market will likely fully recover.
More to that, short-term momentum indicators including moving average convergence divergence (MACD) show signs of short-term recovery for bitcoin.