What is the future of Bitcoin?

The ups and downs of Bitcoin prices are always impressive. On Monday, the price of Bitcoin on the Bitcoin trading platform BTC-e fell to $309, a drop of nearly 40% from the intraday high of $498. It is worth mentioning that Bitcoin is not the worst-performing "digital currency". Darkcoin plummeted 48% on the same day. From the peak of $1,242 in November last year to now, Bitcoin has fallen by more than half, and has continued to fall in recent weeks and the decline has worsened. The domestic Bitcoin price has also plunged sharply. After falling below 3,000 yuan last weekend, it fell to a low of 2,751 yuan on Monday, setting a new low since May. As of press time on the 19th, the transaction price was around 2,925 yuan.

From its birth in 2009 to the end of last year, the price of Bitcoin has been soaring. However, this year, Bitcoin trading platforms have frequently been exposed to problems such as hacker intrusions and technical failures. In particular, after the world's largest platform Mt.Gox encountered a bankruptcy crisis due to the theft of Bitcoin, the price fell sharply. In order to prevent risks, foreign countries have strengthened Bitcoin supervision. On December 5 last year, my country issued the "Notice on Preventing Bitcoin Risks". This year, many banks have successively stopped providing financial services for Bitcoin transactions. Some analysts pointed out that the strengthening of supervision was the reason for the previous plunge in Bitcoin prices, but the recent decline is somewhat inexplicable.

"Compared to before, the price fluctuation range of Bitcoin has been much better, but it has been very volatile in the past two weeks." Ling Kang, vice president of Bitcoin China (BTCChina), said in an exclusive interview with our reporter on August 12 that the BTC-e platform had a large number of sell-offs in a short period of time due to leveraged lending, but the price rose again afterwards. The domestic price drop was due to the suspension of financial services and the decline in the scale of capital inflow and outflow. According to industry insiders, from a foreign perspective, the number of people speculating in coins decreased significantly in the first half of the year, but the number of people who actually used Bitcoin increased steadily because more and more merchants accepted it. Some experts believe that the most optimistic prospect for Bitcoin is to become a means of payment in a local area while ensuring security.

Prices plummet again for unknown reasons

According to the transaction data of various Bitcoin platforms, the price of Bitcoin was still hovering above $600 last week, August 11. In just one week, the price has continued to fall, falling by a quarter. As for the reasons for the recent sharp drop in the global Bitcoin market, industry insiders said that the reasons are unknown and may be affected by multiple factors. From the news perspective, the shadow of the New York Digital Currency Act has led to an uncertain future for Bitcoin. The reporter noted that the draft of the New York State Digital Currency License (BitLicenses) is currently in the stage of hearing opinions and will end on September 18. Since the draft has put forward strict requirements for virtual currency-related companies in terms of consumer rights protection, technical security and funding requirements, the industry is worried that it will lead to the "destruction" of the industry. In addition, on August 11, the U.S. Consumer Financial Protection Bureau issued a warning about the risks of virtual currencies such as Bitcoin, including unknown costs, exchange rate fluctuations, and vulnerability to hacker and spam attacks.

The strengthening of Bitcoin regulation has caused controversy among all parties, but the frequent occurrence of risk events has highlighted the necessity of regulation. On August 15, Bter.com, a well-known domestic altcoin exchange, claimed that it was hacked and 50 million NXT (Futurecoin) was stolen. The latest development is that Bter has reached an agreement with the hacker and bought back all 50 million NXT by paying 320 bitcoins. Most analysts believe that the domestic Bitcoin price falling below 3,000 is directly caused by this incident.

In addition to the news, some industry insiders believe that the sale of Bitcoin by domestic miners to repay electricity bills or loans is also an important reason. The Bitcoin mining industry is a capital-intensive industry with huge initial investment. Many miners borrow money to buy mining machines, such as CPUs, motherboards, power supplies, and chassis. Now that the larger domestic miners have reached the point of repaying their debts, they are selling coins to repay their debts. The supply and demand relationship is broken, causing the price of Bitcoin to fall. In addition, the large-scale money-making of the new virtual currency Vpal (Vbao) has also caused the digital currency market to have more withdrawals than deposits.

Local payment methods may be the future of Bitcoin

Strengthened regulation and a sharp drop in prices have cast a shadow over the Bitcoin industry, and many analysts are pessimistic about its prospects. However, Ling Kang believes that from the perspective of global trends, the prospects are not too bleak. The reporter noticed that Bitcoin applications have made great progress abroad in the past six months, and major merchants accept Bitcoin every week. Last week, Rakuten, known as the "Japanese Taobao", announced that its US subsidiary accepts Bitcoin payments. At the same time, the number of wallets of Blockchain, a world-renowned Bitcoin wallet and query company, exceeded 2 million, which means that more and more people are using Bitcoin. Industry insiders said that although some speculative funds have withdrawn from the Bitcoin market, more and more people are using Bitcoin.

Unlike in foreign countries, Bitcoin is currently mainly a speculative tool in China, rather than a payment tool in the real economy. An industry insider said, "This thing is purely speculative in China, and its practical value is relatively weak." Ling Kang introduced that there are currently tens of thousands of companies abroad that accept Bitcoin as a means of payment, such as Microsoft and Dell, but there are none in China. "There are successful cases abroad, which shows that this model works, and China will follow suit at a certain time." Ling Kang predicted.

In order to prevent money laundering risks and maintain financial stability, my country has implemented unprecedented regulation on Bitcoin, including the "Notice" issued last year and this year, many banks and third-party payment institutions stopped providing financial services. Some experts said that in the face of an unfavorable situation, domestic Bitcoin trading platforms will actively seek a way out, change from "online" to "offline", or even directly "move" overseas to evade regulation. "Domestic platforms are greatly affected by regulation. Our main team is still in China, but some platforms have begun to set up outlets abroad." Ling Kang believes that the platform going underground and the website moving overseas are not conducive to preventing money laundering risks.

Ling Kang said that becoming a local means of payment is the future of Bitcoin. To make progress in the application of Bitcoin in China, risk prevention must be done first. He suggested that, on the one hand, regulatory authorities should cooperate with trading platforms to form a joint force to prevent risks. Regulatory authorities should implement a "combination of loosening and blocking" policy and issue regulatory details. If the platform is completely moved abroad and complies with foreign laws, it will not be conducive to cooperating with relevant investigations. On the other hand, trading platforms must strictly abide by anti-money laundering laws and regulations. Ling Kang introduced that BTCChina currently implements real-name authentication for traders and connects with the ID card authentication center of the Ministry of Public Security. At the same time, customers who withdraw more than 200,000 yuan are required to upload their ID card materials and conduct relevant inquiries.