The Chinese were bust over the Golden Week holiday... buying Bitcoin (up from 6350 to 7550 in Yuan). But now that the vacation is over, China's central bank is back to its crackdown and following reports of "closed-door" meetings with various Bitcoin exchanges, the virtual currency was sent tumbling this morning.
As Bloomberg reports, officials from the People’s Bank of China are meeting Wednesday afternoon with representatives from a number of the nation’s trading venues, the people said, asking not to be named because the meeting is private. Money laundering is among the topics on the agenda, said one person without elaborating.
The cryptocurrency has reacted sharply to reports in the past that China may tighten rules on the digital currency to curb capital outflows. The Wednesday pow-wow follows a regulatory inspection of exchanges including OkCoin, Huobi and BTCC in January. Bitcoin had risen by 120 percent over the past year as investors made purchases to hedge against yuan depreciation. The central bank didn’t respond to a faxed request for comment.
“There are a lot of people shorting bitcoin now, one because of the regulatory environment, another because the price is relatively high,” said Tian Jia, a Beijing-based trader of bitcoin. “The fact that PBOC continues to look into this issue might make people think that the whole thing isn’t over, and based on past trends, whenever the central bank holds meetings with exchanges the price will drop.”
China has taken a central role in the bitcoin market in recent years as its citizens have become leading traders and miners of the cryptocurrency. Their interest has been fueled by the hunt for alternative assets, zero exchange fees and the low cost of electricity to run the computers needed to mine the currency. But any increased scrutiny from government authorities may dampen purchases of bitcoin in China.
The last time PBOC 'probed' the exchanges the reaction was dramatic (but as is evident, the effect was to kill volumes and control that capital outflow)