Bitcoin Drops by 10%! Chinese Exchanges Suspend Withdrawals!
It’s not the first time China has been in the cryptocurrency news. At the start of January, there was a scare of regulations on exchanges, and now, a month later, there’s more news coming out of the world’s second-largest economy.
On February 9th, without any warning, an announcement for several Chinese exchanges — including OKCoin and Huobi — to suspend all withdrawals for one month was declared!
Within hours, the Bitcoin price plunged almost 10%, from $1060 to $950 across all the exchanges. Worldwide panic had gripped the Bitcoin markets once more and triggered traders to panic sell.
The People’s Bank of China has asked the exchanges to upgrade their Anti-Money Laundering (AML) systems, and until then, all withdrawals are halted. The exchanges have stated that this will take approximately one month – the suspension affects all Bitcoin and Litecoin withdrawals.
OKCoin and Huobi are two of the largest exchanges in China, with approximately 25% of the global Bitcoin trade volume. Combined, these two exchanges handle roughly $50 million worth of trades on a daily basis.
With this unexpected development and fearmongering playing its part, suspended withdrawals lasting for a month could potentially drive digital capital away from China and towards American and European exchanges. Many people with vast amounts of funds on Chinese exchanges may have a stressful time as exchanges try to change in accordance to the PBoC demands.
Why Has the PBoC (People’s Bank of China) Done This?
Last month, exchanges in China were inspected and called into question by the PBoC. Many were deemed to not be compliant with laws and regulations. It was these events that led to margin trading being either severely reduced or stopped altogether, an action that was welcomed by investors and reduced volatility in the Bitcoin price.
Following the inspections last month, the PBoC now wants the exchanges to upgrade their AML systems to comply with local regulations.
Several of the exchanges were deemed to not be in compliance with regulations and Anti-Money Laundering rules.
Over the past weeks, Bitcoin’s price has steadily recovered from the panic that caused the price to go into free fall in early January. Bitcoin currently hovers around the $980 region, showing some support is pushing the price lower.
What Could This Lead To?
The news of OKCoin, Huobi, and other exchanges halting withdrawals is bound to have an impact on the global stage, with investors potentially becoming more wary about how they store their bitcoins. This could trigger other governments to begin similar actions, leading to potential regulations on exchanges in their respective countries.
Fearmongering is a regular aspect of the Bitcoin world, and fake news could cause further drops in price. I hope that people have learned to become less susceptible to hype and rumours by now.
For long-term investors, this is a mere hiccup. The price is still strong, and for many, this has just been an opportunity to buy cheap bitcoins.
On the contrary to this, traders will be feeling the burn. Many didn’t expect this and were likely planning to take profit from the upward trend of Bitcoin’s growing price, although they may have bought some bitcoin and made profit on the bounce back from dipping to $950.
The best course of action to take is to not panic, not believe the hype, and think long-term – maybe even make the most of the cheaper bitcoin!
Always do your research, store your bitcoin as far away from exchanges as possible, and only invest what you can afford to lose.