Actions of Chinese Government May Reduce Bitcoin Volatility, Improve Adoption

The best performing asset of 2016, Bitcoin has been under the weather lately. The cryptocurrency whose price had crossed the $1100 mark started losing steam, to fall as low as $767. The fall is said to be fueled by recent developments in the Chinese market.

Following the initial drop, fueled by a short-lived positive performance of Chinese yuan, the government decided to review the cryptocurrency platforms. The review came amid allegations of Bitcoin fueling the capital outflow. The cryptocurrency community believed that harsh regulations were in the store, causing them to indulge in panic selling.

The Chinese government seems to be treading carefully around Bitcoin regulations. Given the cryptocurrency’s inherent potential and existing user base in the country, the government has decided to implement certain measures to safeguard the interests of investors.

The People’s Bank of China is already considering the possibility of assigning third party custodians for Bitcoin markets. At the same time, the central bank has also conducted spot inspections of major Bitcoin exchanges in the country including BTCC, Huobi, and OKCoin. Reports suggest that the inspections were carried out to investigate whether the platforms have violated any existing rules including market manipulation, money laundering, and unauthorized financing. The PBOC’s report on these inspections is still awaited.

Meanwhile, Huobi is said to have limited its margin trading from the previous 10 million yuan to 100,000 yuan. The move on Huobi’s part is expected to minimize the volatility of Bitcoin by limiting volumes and exposure to risk. This will prevent people from trading indiscriminately, also protects them from huge losses due to volatility.

All the steps taken by Chinese authorities seem to be in line with its intention to exert more control over the cryptocurrency without banning it. China is a leading Bitcoin market and by protecting the interests of investors, the government is encouraging more people to become part of the cryptocurrency community. All these factors could turn positive for Bitcoin.

Ref: Business Insider | Reddit | Image: NewsBTC

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