Bitcoin and the Chinese Yuan officially break up, and the price surge confuses the world

Editor's note: When currency inflation occurs, the country will raise interest rates and withdraw liquidity to ensure that the total amount of currency is roughly equal to the total economic volume.

Huobi and OKCoin also stopped all digital asset trading for RMB on October 31. Bitcoin China also officially stopped withdrawing cash and coins yesterday. Since the central bank’s strong regulation in September, requiring Bitcoin to stop RMB spot business, the successive closure of domestic trading platforms also means that Bitcoin and RMB have officially parted ways.

Influenced by the news, the domestic Bitcoin price fell from 30,000 yuan to 17,000 yuan in September. The international Bitcoin price also fell below 4,000 US dollars. After that, the Bitcoin price experienced a roller coaster market, taking off across the board, and the price rebounded 80% to 6,000 US dollars. The rebound was so high that it made the world crazy and confused.

Regulatory considerations for Bitcoin

Before the introduction of transaction fees on Bitcoin trading platforms, Chinese players accounted for 70% of global Bitcoin trading volume, and after the transaction fees were charged, China's Bitcoin trading volume accounted for 30%. China's trading volume is very large, and some people believe that the price of Bitcoin is completely driven up by Chinese people. At that time, under the soaring Bitcoin price, the vegetable sellers could not sit still, and the regulators saw the madness of the virtual economy circle and the currency circle.

Some people believe that foreigners are more concerned about Bitcoin technology and Bitcoin application development. However, the regulatory authorities have not yet seen the benefits to the real economy, but only see that Bitcoin facilitates money laundering, so the regulatory authorities have taken strong action.

Since there are so many players in China, many people think that an era has passed and the price of Bitcoin has peaked. There is no hope of recovery.

However, reality has slapped the bears hard in the face. Not only has Bitcoin recovered its lost ground, but it has also risen by 80%. Is the day of one coin for one villa far away? Now the facts are becoming clear. Bitcoin is traded internationally, and China alone has banned Bitcoin trading platforms, which has a very limited impact on the world's currency prices.

Why is Bitcoin valuable?

The value of the US dollar and the RMB is backed by sovereign states. When currency inflation occurs, the state will raise interest rates and withdraw liquidity to ensure that the total amount of currency is roughly equal to the total economic volume.

Gold is a rare metal by nature. There is a saying that gold and silver are not currencies by nature, and currencies are naturally gold and silver. The value of diamonds, however, is a commercial scam. The British company De Beers controls 80% of the world's diamond supply. Newly produced diamonds will be bought out by the company, thereby manipulating the price of diamonds.

Bitcoin is a decentralized digital currency with a total issuance of 21 million. It is pre-set by the code program and has no inflation problem. Although various sovereign countries are sniping at the legitimacy of Bitcoin, Bitcoin has always survived in the gray area.

Especially some small countries, their national governance capacity is very poor, and there is basically no national credit. Compared with the stability of Bitcoin, their national currencies are basically on the verge of inflation collapse. For example, Venezuela and Zimbabwe, the price of Bitcoin in Zimbabwe has reached a high of $10,000, because people are eager to get rid of the Zimbabwean currency in their hands, and the transaction price is much higher than the general international price of $6,000.

Bitcoin players move overseas and offline

Although on-site trading is prohibited, Bitcoin players have turned to overseas trading platforms or conducted over-the-counter transactions, mainly in three modes: online P2P, online B2C and offline transactions. The transaction scale of the three overseas over-the-counter trading platforms LocalBitcoins, Paxful and CoinCola has repeatedly soared, with a total Bitcoin transaction volume of 680 million yuan in two weeks.

Online P2P transactions are similar to the "Taobao" model. Traders can conduct peer-to-peer transactions with sellers holding Bitcoin through over-the-counter trading platforms such as LocalBitcoins and CoinCola.

On the CoinCola platform in Hong Kong, when a user takes a picture of a Bitcoin, a transaction request is issued. The Bitcoin to be purchased will be deducted from the seller's wallet, but will be locked in CoinCola's official escrow account. After the seller confirms receipt of the money, the Bitcoin will be transferred to the buyer's wallet. The escrow program will lock the Bitcoin until the seller confirms receipt of the payment. After the buyer pays, he confirms receipt and gives the seller a review.

Alipay is often used for overseas Bitcoin transactions

Alipay, WeChat, and bank transfer are the main payment methods for over-the-counter transactions of Bitcoin against RMB (BTC-CNY). In 2017, on CoinCola's trading platform, 85% of the selling orders chose Alipay as the payment method, followed by bank transfer, accounting for 12%.

QQ group offline transactions require face-to-face delivery

For over-the-counter transactions of Bitcoin, the price is adjusted in real time based on the Bitcoin trading price in the global market.

Private transactions within QQ groups are generally risky. Group members said that Bitcoin is available for sale, but transactions must be made in person, and the price of Bitcoin will refer to the price in the global market. Unfamiliar people trade through the group owner. It is completely private transactions, and fraud is frequent.

These three models show that Bitcoin and RMB are still closely connected and difficult to cut off. It's just that the transaction chain has become longer. The government only banned Bitcoin trading platforms, not Bitcoin. This action shows that the government's attitude towards the risks of Bitcoin has generally been explained. You bear the risks of private transactions yourself.

For overseas over-the-counter transactions, the security of the platform is the most critical. There have also been cases of founders of overseas trading platforms running away.

The emergence of Bitcoin, from obscurity to global popularity, is itself a social experiment with wide-ranging impact. The policy responses of different countries are also different. For example, Japan recognizes the legitimacy of Bitcoin, and the founder of Bitcoin is a Japanese name. Bitcoin's hard fork, technology upgrades, and the rise of the mining industry are all subject to strong uncertainty. Unless there is a global joint action, Bitcoin will be an eternal existence caught in the cracks of existing international relations. Only God knows the rise and fall of the currency value.