Who is swimming naked when the Bitcoin tide recedes: Industry insiders say value will not disappear due to regulation

Original title: Who is swimming naked in the Bitcoin market when the tide recedes?

□Reporter Wang Hui

After a surge of more than 200% in 2016 and a violent rise at the beginning of this year, the price of Bitcoin in the Chinese market has collapsed since the evening of January 5. Market data from Bitcoin China shows that at 12:00 p.m. on January 12, the price of Bitcoin was 5,324 yuan per unit, a drop of 40.15% from the historical high of 8,896 yuan per unit set on January 5.

Analysts said that Bitcoin, as a "virtual currency" that has emerged in the global market in recent years and has been widely recognized by investors, has certain investment value in the development of modern finance. However, after years of continuous speculative speculation, its price level has seriously deviated from its actual value, and its actual use value in the short term is unknown. Even if relevant investors intend to participate in long-term Bitcoin investment, they must guard against the risk of "swimming naked" after the hype tide recedes.

The market is experiencing a major turning point

After the Bitcoin market soared throughout 2016 and rose abnormally again at the beginning of this year, the central bank has continued to impose heavy regulatory measures on the Bitcoin market since the second half of last week.

On January 6, 2017, the Shanghai headquarters of the People's Bank of China announced that on the same day, the Shanghai headquarters of the central bank, the Shanghai Municipal Financial Office and relevant regulatory departments met with the main person in charge of the Shanghai Bitcoin trading platform, and emphasized that Bitcoin is a specific virtual commodity and cannot be used as currency.

On January 11, the Shanghai headquarters of the central bank conducted another on-site inspection of Bitcoin China, focusing on whether the company was operating beyond its scope, whether it was conducting credit, payment, foreign exchange and other related businesses without permission or license; whether it was involved in market manipulation; the implementation of the anti-money laundering system; fund security risks, etc. On the same day, the Central Bank's Business Management Department and the Beijing Financial Work Bureau and other units formed a joint inspection team, and entered Bitcoin and Litecoin trading platforms such as "Huobi.com" and "Bihang" on January 11 to conduct on-site inspections on the trading platforms' implementation of foreign exchange management, anti-money laundering and other related financial laws and regulations, and relevant regulations on trading venue management.

It is worth noting that as early as December 2013, the central bank and five other ministries and commissions issued a document defining Bitcoin as "non-currency", and at the same time required financial institutions and non-financial payment platforms not to "get involved with Bitcoin" and prohibited the provision of a number of services for Bitcoin, including custodial fund accounts. Regarding the regulatory actions of the central bank and relevant departments three years later, some industry insiders likened it to a heavy policy negative similar to the "2007 A-share market '5.30' stamp duty increase" type.

Some senior Bitcoin players said that after the tightening of regulation, if the speculation and trading scale of related platforms cannot be significantly reduced, it is possible that the central bank will continue to strengthen regulation in terms of investor access, trading rules, trading platform supervision, and fund custody. This will obviously be a long-term negative for the trend of Bitcoin prices.

Triggering the "gymnastics" market

Regarding the "heavy regulatory blow" that the Bitcoin market encountered at the beginning of 2017 and the astonishing "roller coaster trend" of Bitcoin prices, analysts said that the recent sharp fluctuations in Bitcoin prices, although affected by short-term news shocks, were to a greater extent caused by excessive market speculation.

Relevant market data show that the price of Bitcoin increased by more than 200% in 2016, making it the best performing asset in the world that year. In the short "four and a half" trading days after the beginning of 2017 (from January 1 to the afternoon of January 5), the price of Bitcoin soared by 30% again without any positive stimulus, which fully demonstrated the amazing hype trend in the Bitcoin market. After that, it is reasonable for the price of Bitcoin to experience a rapid "backflip" due to the negative policy and regulatory factors.

A Shanghai player told a reporter from China Securities Journal that in the past two years, the scale of domestic Bitcoin transactions has accounted for more than 93% of the global Bitcoin transactions. In order to maintain the "half-true, half-false" trading enthusiasm in the Bitcoin market, many trading platforms will hire professional programmatic investors to conduct programmatic "machine transactions" 24 hours a day, that is, the transactions seen by many investors are actually many invalid "reverse" transactions of self-buying and self-selling. In addition, in order to enable more people to participate in the buying and selling of the Bitcoin market, various trading platforms generally split one Bitcoin into multiple parts. For example, at a certain point in time, the price of a single Bitcoin is 5,000 yuan/piece, then the trading platform can allow investors to buy 0.001 Bitcoin at a price of 5 yuan by splitting a single Bitcoin into 1,000 parts. The lowering of the trading threshold has prompted a large number of retail investors to participate in Bitcoin speculation with the mentality of buying "lottery tickets".

Only Bitcoins left and no coins?

Regarding the trend of the Bitcoin market after the central bank and other regulatory authorities have strengthened supervision, analysts pointed out that as the first virtual currency in human history that can be widely recognized by the public, its real and effective investment value is not expected to disappear completely due to regulatory crackdowns. Although it is unlikely that Bitcoin will be left with only "bits" and no "coins" for a long time in the future, after the speculative tide quickly recedes, the price and transaction volume of Bitcoin in China may gradually fall and shrink. In addition, investors who are still participating in or intend to participate in long-term investment or short-term speculation in Bitcoin in the future need to be wary of asset security risks after the tightening of platform supervision.

Yang Tao, a well-known private equity investor in Shanghai, said that as a virtual currency, the intrinsic value of Bitcoin does not need to be completely denied. However, the speculation and trading behavior of some domestic platforms, like the various speculation-type trading platforms that have been popular in China in recent years, may be a complete Ponzi scheme that makes money from the price difference and handling fees.

In addition, some industry players said that the current major domestic Bitcoin trading platforms, even Huobi.com, Bihang, and Bitcoin China, which have the largest trading volume, have not implemented third-party custody of funds. Once the Bitcoin platform runs away, players will have nowhere to complain. Previously, there have been cases of Bitcoin trading platforms running away with players' Bitcoin and trading funds overseas.

Regarding the recent central bank's regulatory intervention in the Bitcoin market, analysts pointed out that after this major turning point in market regulation, Bitcoin's long-term price trend is expected to continue to be suppressed by the negative impact of increased regulation, and investors must pay close attention to relevant policy trends.