Bitcoin Forum

In the previous posts I correctly predicted China government's attitude towards Bitcoin, and the month-long spike of Chinese bitcoin price. I also warned against China-lead crash. I haven't posted anything for about 2 months since, for my hands are full.

I will first list a few outlandish view points of Chinese market popular on this forum.

Myth: Money moves power in China. In the end money decides.
Reality: Power moves money. If you are responsible for something big, there are times you have to make a choice, to choose between profit and loyalty. In the end loyalty is the bright choice, profit is the gloomy choice that begins your downward career. If you make the wrong choice, not only you have to acknowledge failures, but you need to acknowledge it willingly and faithfully, because that behaviour is loyal. I often wonder why many westenrs are readily willing to accept a theory if that theory involves money powered political decisions - which does happen but are not mainstream here. In the bitcoin game, the financial institutes, even the ones not owned by our government, will face the choice and their decision is predictable. If some financial insitutes allows bitcoin to live (like huobi's case), it is because their time of choice hasn't come, not because they chose differently.

Myth: Chinese citizens won't be able to withdraw cash from bitcoin platforms.
Reality: Time and time again I see westerns and western-educated Chinese trying to read the sense out of paper notificcations. The correct method is to understand the ruler's intention, not the ruler's order. Doing what the order says only garantee you are not punished for disobeying that particular order. One of the intention of the ban is to prevent social unrest, the less noisy the better. Banning withdraw is going to create unwanted outcry which defeats the purpose of the 5th Dec ban, further more it unnecessarily creates a confrontation between government and traders (before was trader<-> platforms). Once you see the intenion, you know withdraw will be allowed, if not enforced. Most likely withdraw will be through the banks for better records.

A short culture background info on loyalty vs regulation:

Regulation = if you go aginst the rule, you will be punished. Undersand the intention of the rule. You are rewarded by wining the game following the rule.
Loyalty = I can punsih you any time, from a database of regulations, or without any regulation (like how Apple is punished). Understand the intention of the ruler. I will reward you.
(Edit: In China that I is the party.)

Myth: Motivation is for Chinese government to prevent outflow of CNY.
Reality: If you think along that line, you may misjudge and predict that regulation will replace the ban. Bitcoin creates 3 problems: 1) an example of ignorance of central power; 2) a possibility of social unrest at the market crash; 3) outflow and money lundry. Of these three the last is the least important (it is still important but least) and a more sounding reason. Our government wishes by sheer authority the market can cool down. I think if it is cooled down, it will be allowed to exist, otherwise it will be harshly killed.

Myth: Like Hong Kong, Shanghai Free Trade Zone respects rules
Reality: Hong Kong maintained its system because people defend it as a bottom line: it is not rules that worked, it is people that worked (to defend rules). Our government never liked that HK culture but cannot simply chop it. There is no similiar culture background in Shanghai. Shanghai Free Trade Zone is where various new things are allowed to live longer so that the government can see what kind of fruit it begets, which one benifits, which one isn't, and select what they want; chop off unwanted - like Special Economic Zone we had before. Hong Kong is a free trade zone, Shanghai Free Trade Zone is a controlled experiment. Like all experiment, you the bad seed are allowed to live longer because you are more closely watched. When they feels certain that your bad seed is weed, they won't let it grow.

Now the current situation:

The sentiment after 89' is that if government want to destory an enemy inside China, it will be done (unless it is too abstract to kill, like, an idea). Not everyone agrees, but that's the general sentiment. Since 5th Dec, believing in the power of the government, the market attention dramaticallly moved to alternatives like LiteCoin. Not only they have more potential of growth (so thinks the Chinese investors), but also they are small enough to live longer under the radar. I didn't even look at the data but I believe BTC trade volume shrinked a lot, sentiment cooled down, exactly as government's wish. China crash influnced global market once. However the global market won't always follow. The rest of the world is going to promote and increase value of bitcoin, and traders in China won't sit and watch. Two things may happen in 2014:

1. Firmly believing that the government have control, China maintains low price and become a bitccoin export country, and receive moderate media coverage. Bitcoin is thus allowed to live.
2. The spikes in global market calls again the passion in China. And when our spirite of gambling is lit up, anoher spike in China and warm media coverage in China will lead a harsher ban from the government, probably force bitcoin into black market.

It is possible 2 happens after 1.

P.S. This post is sent through a web proxy in U.S. The author is still living in China. And the telltale timestamp means I couldn't sleep well tonight, hence having time to write a post.

Thank you very much for your post.

It is very interesting to read what you say about regulation and royalty.

It is also great to hear your predictions, which give a balanced view of possibilities and steer away from simplistic black and white proposals.

The general gut feeling I have been having about the evolution of Bitcoin in China is along the lines you describe.

"China crash influnced global market once. However the global market won't always follow."

There are signs already that BTC China is lagging behind Bitstamp and Gox. My gut feeling is that many people here are now coming to terms with the idea of China not leading the market.

You propose a couple of ideas as outcomes:

"1. Firmly believing that the government have control, China maintains low price and become a bitccoin export country, and receive moderate media coverage. Bitcoin is thus allowed to live.

2. The spikes in global market calls again the passion in China. And when our spirite of gambling is lit up, anoher spike in China and warm media coverage in China will lead a harsher ban from the government, probably force bitcoin into black market."

I am not sure how long proposal 1 could hold. The excitement over Bitcoin is increasing and there are consistent signs that it is just beginning to break into the mainstream in areas such as e-commerce, investments, finance, etc. There are of course diverse opinions but it seems certain that there will be increased investment in the short to mid term at least, which should have the predictable effect on prices. It could well be the case that the Chinese spirit is lit up by this, as you say!  :)

In which case a possible scenario where Bitcoin could become a black market commodity in China could play out.

In any case could you give us an idea of the Bitcoin community in China? Is it very diverse? Many tech-types? Big investors? A plaything of the elite? Sorry if this sounds like a stupid question but it would be interesting to know your opinion about what kind of people hold Bitcoin now, and also about what kind of people would continue to hold Bitcoin if scenario 2 plays out.

Thanks again.

I don't really understand what royalty means in this context. Are they the authorities, the government?


But if they harshly kill it (or push it underground) won't that cause a market crash and social unrest? Then they are causing exactly that which they are trying to prevent... And if they're so concerned about the decentralized nature of Bitcoin why won't they just outright ban it right now? Why would they even allow positive media messages to appear on tv about bitcoin first and only do something about it when lots of people have already invested in it and thus causing more social unrest?

Thanks for replying and clarifying the Chinese point of view in here by the way, it is much appreciated. :)

A very interesting perspective zhangweiwu.

Thanks for going to the trouble.


I think much is lost in translation here and the author would struggle to find fitting terms in English regardless of his ability in the language...

....I guess dignity, respectful for tradition, honourably, etc etc.

You guessed it right. I meant Loyalty and I misspelled it Royalty. Many Chinese pronounce R and L rather alike and they write it alike.

I corrected my post with a search and replace. And Loyalty is "loyalty to the party" (sometimes colorfully reworded as "royalty to the people" - that expression used to be "formality red", now is "rehorical pink" color). I have added an Edit Note in the text.

Thanks for this post, for non-Chinese your insight is really useful.

so what are the price predictions?  will the govt crackdown on the huobi deposits and btcchina vouchers?  is it real trading or bots?

down.

(unless it is too abstract to kill, like, an idea) = bitcoin

Thank you for taking the time to post while you could not sleep.  

You have made many important points which I will consider carefully.  Please come back and share your thoughts with us more often.

Unfortunately, there is still a lot of uncertainty about what will happen if anything come Jan 31st. Market is on hold until then.

Thanks for that clear review on china!  :)

Thanks for some perspective on Chinese culture.

That "choice" thing is interesting and the part about following ruler intention versus following regulation.

Tyvm bro very informative stuff

Yes, most helpful.  Thanks.

No sorry, i just skim read it, but i didnt get it, just another BS about some principles, ethics etc. Sorry, nobody cares :-).

I really didnt get the point of your post, so do you think your government will ban bitcoin or not, or are the possibilities 50% to 50%?

FFS!

Welcome to my ignore list u damn rude ignorant fool.

Thank you for the post.

One thing I find fascinating is the idea that the govt has the best interests of China as a whole in mind.  To an American like me, that seems too unbelievable to be true.  We are used to our govt using power to help themselves and their cronies at the expense of the people.  A libertarian like me believes everyone in govt is screwing the majority to help the few.  Democrats believe the Republicans are screwing the majority to help their few friends, and Democrats vice versa.  Either way, most Americans think they're being screwed.  It seems strange that people in the Chinese govt place loyalty above profit.

A question for you regarding the future.

What if Bitcoin takes off in the rest of the world?  What if it reaches a much higher price, i.e., $100,000, or similar, and achieves price stability, thereby making it a useful medium of exchange?  What if Bitcoin actual does what us dreamers desire:  a replacement for the dollar, euro, etc.?  

Will the Chinese govt still ban Bitcoin even if it looks like China will be "left behind"?

Hard to predict what will happen but I liked your explanation, OP. Your first prediction is similar to what some smart people posted here a month ago. Unfortunately the crowd was already screaming in panic and running towards the exit.

Thank you very much for taking the time to explain some fairly complex structures of Chinese market. This is an interesting view which helps me fill in a lot of details. I'm also interested in what kind of people are currently interested in Bitcoin, like T.Stuart was asking?

Interesting stuff, keep up informing us.

In furtherance to the OP's description of the Chinese governments methodology of 'advising' of their intent and 'leaving' it up to groups and individuals to cooperate with their intentions, I read the following recent article, containing a rather telling quote from a Chinese Bitcoin speculator:

“We’re reading the tea leaves,” says Shanghai Bitcoin entrepreneur Jack Wang. “But it looks like they’re going to squeeze the exchanges until they’re not able to operate.”

http://www.forbes.com/sites/kashmirhill/2014/01/06/china-bites-into-bitcoin/

China is still by far the biggest Bitcoin trading nation. Huobi and OKcoin who have implemented 'work-arounds' to the transaction bans have overtaken BTC38 who have decided to fully comply with the 'intent' of the Chinese government. If China does finally put its foot down in a way that allows no work-arounds such as vouchers or private bank transfers, then how anyone can delude themselves that Bitcoin won't suffer a brutal correction as a consequence, is beyond me. Of course, it is a big 'if' indeed and may never fully come to pass.

I have been bearish since the last crash rationalising my coldness on Bitcoin with this China thing still needing to be played out but events have proven that my attitude has forced me to miss out on almost 100% profits to date (I did actually have heavy buy-ins triggered at ~$540). I have traded the rise here and there, turning a small slice of profit as things have went, give or take the odd stint if idiotic profit raping panic selling. The thing that is knawing at me, is do I buy in now all the same in the hope that the whole China thing will somehow be gleaned over, and that Bitcoin can look forward to its otherwise admittedly bright looking future, or do I do the thing that common sense seems to be yelling at me and stay the fuck out until China is done and dusted.

The Chinese have previous in regulating a virtual currency that came to be traded on commodity markets alongside Gold, out of existence.

He is speaking of loyalty to China's leadership. The leadership of China tolerates little internal dissent. They are also very careful to prevent anyone from forming a center of power that doesn't have to be loyal to the leadership. For example, the managers of the larger state owned companies are moved from one company to another every few years. This prevents them from acting like owners. And remember what happened to Bo Xilai.

Recommended reading: "How Asia Works". (http://www.amazon.com/How-Asia-Works-Success-Failure/dp/080211959X)

You guys certainly encouraged me by acknowledging the information is useful and fills the gap, and by tipping me. However the last sleepless night has costed my health, weakened me, and I was in fever the days following. Can't expect frequent posts from me.


Nagle is correct. Living in China and never been to an English speaking country, I thought by saying loyalty everyone already knows what it means. This word Loyalty was turning into a negative word in China (meaning: defend position in a coterie by hurting everyone outside, think of Mafia for example) and I (mistakenly) took it that the rest of the world think so too. A lesson for me to watch for culture shock.


I will answer that in a separate post. It is a topic of its own, and a bit lengthy. But I may fail it, for I am no longer rich in my time.

I am not so sure. I feel that in China the gloomy outlook has been built in the current price and those who would quit has done so. As I do scrapping, I always keep half of my hand in coins and half in cash, thus if it really go down I would still leverage the opportunity.

You are a very smart man but I mostly admire your patience in waiting for a dip. I tried to wait but I can't stop buying.

It (can't stopy buying) perhaps is not unwise. We will see. At the moment panic sell risks higher than panic buy. "Buy in panic, sell in peace" may still be a good strategy.

This might be generally true but it can never be absolutely true.

Even if 80% of Bitcoin holders in China intend to hold their coins post Jan 2014, there will still be 20% that need to cash out.

This would still trigger a significant sell-off event.

Latest regulation simply means China will be left out of a billion dollar market. At least until the party changes their attitude. Perhaps they will once they realize they are hurting the Chinese national economy.

Bitcoin price and economy will continue to rise everywhere else if 'the party' likes it or not.

Bobby Lee sounds pretty optimistic.

http://www.reddit.com/r/Bitcoin/comments/1up06f/fyi_update_email_from_btc_china_today/

If this is how things are allowed to stand after the 31st Jan, then it changes everything.

Interesting he doesn't mention anything about the government regulations(ban)

In any case could you give us an idea of the Bitcoin community in China? Is it very diverse? Many tech-types? Big investors? A plaything of the elite?

Interesting, good questions. I'd like to know also.

Well, that would be negative, wouldn't it.

If you were a major share-holder in a company, would you want a CEO that went about blurting out negative statements?

Just wanted to say thank you for taking the time to write the post. It's very difficult for us in the west to understand the psyche of the average Chinese person, perhaps it's the same the other way around?

Underneath the btc phenomenon there is another social shift quietly happening, the ordinary people of the east and west are getting to know each other, and that can only be a good thing.

Thanks a lot for this perspective!

I've traveled through China for a month, but I feel like I don't understand its people any better after that trip than before  :-[

Thanks for that objective summary! Part of my family is Chinese and I think you just nailed the whole point regarding their politics.

thanks

Here's a seemingly well-researched article on Wired that pretty much confirms a lot of the speculation on this thread:

http://www.wired.com/wiredenterprise/2014/01/huobi/

Thanks for this. While I appreciate OP's sentiment, his words are sometimes opaque and true meaning hard to fathom.

Interesting as usual, thanks

It is here: Part 1: Answer to “Who are trading bitcoin in China”  (Read 641 times) (https://bitcointalk.org/index.php?topic=406635.msg4407488)

Thanks once again, and looking forward to the consecutive parts!

here: https://bitcointalk.org/index.php?topic=406637.msg4407494

That was an eye opening read, thank you very much.  Being in a western culture you don't really get to look at another countries mindset unless you live there for a while.  And I see you've provided more reading for us.  Many thanks :)

would you mind sharing with us an update of the situation. espcially with the litecoins and the non-enforced ban etc.
What's the general feeling in China now?

A recent newspaper article laments the death of bitcoin, review how it made many rich and more fell. It states, although the bitcoin movement is officially dead, it has been a legacy of wealth. We have been inebriated in the dream of wealth and prosperity, and wake up too late. In the end, it is being said, lamenting spilt milk profits little, we should draw lessons from it. It was written in a sad tone, unlikely governmental propaganda.

But such articles perhaps doesn't have much influnece, because only the weathered has been trading since the government 15th Dec ban. For your information, nobody is discussing bitcoin in any of the common used-to-be-bitcoin QQ group, nobody, . Litecoin is mostly discussed, among many altcoins, some ironically named, e.g. "Dream Coin", others like "Use Horse Coin in the Horse Year" - I don't know how they are going to advertise if they survive past Year of Horse.

To know the thinking of the weathered, there is a coterie QQ group used to offer me sentiments. Recently they deleted me out without a word, and email to group master pleading help unrepied. I'll have to go social, face-to-face, visiting the nearest bitcoin meeting by traveling a few hundred miles, by this weekend (I live in the remote city of Lanzhou now). The only QQ group that still discuss Bitcoin is this coterie group. (Starting from 2011, I am weathered, except having not learned from it, and lost all early investments to the downfall of Intersango and MtGox).

One thing you can be sure, as it been tested with time: we have few idealists in China, to support bitcoin as an idea that can make the world a better one. We have few idealists for any ideas since culture revolution and the 89' Tiananmen square. Not even the China Dream campaign represent any idealism more than an anodyne. The few idealists in existance are not supported by the society in whole, and even among them there seems to be more communism idealists. In fact, under the zeitgeist the word idealism translated directly meant something different than we hitherto discussed: it (为理想奋斗) means being confident that you can be wealthy against all odds = willing to invest labour and is risk-seeking, and that kind of "idealists" we have lots. This offers you a backdrop for your speculative thinking. That is, if the world really scraps bitcoin, we won't be there to keep the tide.

zhangweiwu,
Just wanted to let you know how much I appreciate both the information in and the sentiments of this post.

It's not surprising that China banned Bitcoin just now.

China is hurting economically; the value of your currency is under a tremendous stress. The recent interest default, the bank runs, now banning Bitcoin.

I think it was a precautionary measure taken to prevent capital flight.

Like you said, the Chinese regard loyalty above profit, unfortunately the rest of the world is intertwined in your currency. The rest of the world does not share the loyalty.

I believe China is uncertain about their ability to prevent an economic collapse where international investment retracts leaving China hyper inflated and stranded. China knows that the collapse wouldn't be a result of the Chinese people but rather international investors, they only made capital flight more difficult for Chinese people.

They banned Bitcoin simply because they don't want the people to have the ability to flee should the value of the yuan collapse.

Are you sure this time the ban is for real? Last thing I read the Chinese exchange operators had not even been informed.

I explained why this ban is real, in my other post:

the China PBOC event explained
https://bitcointalk.org/index.php?topic=540358.20

Now it is revealed true.

What are your post-China ban Bitcoin plans?

Yes, it is an act in prevention, not in reaction, and a few other reasons (that I state below). It is not for the on-going capital fleet which many others guess. Bitcoin is too small for PBOC to act for capital fleet. As I mentioned in the past, PBOC has reserve to buy up market cap of Bitcoin half a million times. To get you a picture, bitcoin to PBOC is like an ordinary citizen to the Mexco city. PBOC is facing problems many times the scale of Bitcoin. Bitcoin is harmless.

The motiviation is 1) maintain authority of CNY; 2) maintain controll over Internat Finance (under competition of Alibaba's YU'E BAO) and 3) perhaps partly triggered by all major exchange's inclusion of LTC, which makes the whole crypto currency thing look like child's play to PBOC - and PBOC should maintain its image by protecting people from 吸储 (evil guys taking in people's rainy day money).

You would think the order is:
1) they ignore you
2) they laugh at you
3) they fight you (= ban you)
4) you win

The order in China should be:
1) they ignore you
2) they ban you, and left you for dead (ban is not a fight, it is punishment/sentence, you should be dead)
3) they fight you (different from ban, a fight is usually signalled by state-own media's opinion maniuplation)
4) you are really dead (unless a new tech removes the need of centralized exchanges)
5) China goverment dead -> this is the longest phase, measured in decades
6) you are revived when others thrived

Yes, I mean that bitcoin outlives this government.

you kinda contradict yourself and i'm pretty positive that you have your own agenda by spreading "seemingly informative articles" about bitcoin situation in china... for certain things you don't need to be in china to understand what it's like in china, you can pretty much get an idea of what's going on if you know your way around...
 in your original post you mentioned 0 population traded bitcoins and now you think government is trying to maintain its image by saving its citizens from some sort of evil get quick rich scheme...  if there are only bunch of traders why would pboc be concerned at all? are there fly by night shops promoting high returns on bitcoins? any articles of citizens who became victims of this "evil pyramid scheme" to me if pboc was determined to go against bitcoin that's where it would've started...
 ok let's assume there was population involved do you really think by just banning bitcoin it can save its citizens from all that "evil pyramid scheme"? if it were really concerned first thing it should do is ban its own citizens from gambling overseas period, gambling causes more social problems than investing in bitcoins and you know very well gambling is in their blood... but the same pboc that's trying to act noble closes its one eye when its citizens still can bypass capital controls by using unionpay to feed their gambling habits in macau....
http://uk.reuters.com/article/2014/03/12/uk-china-unionpay-special-report-idUKBREA2B00B20140312

 as you say bitcoin is a small fly to pboc but if it were why stir up the whole ban fud? now if we ever come to a point where pboc will decide to move against bitcoin it is going to be for the same reason it did to limit QQcoin from trading virtual currencies into fiat... source: http://www.informationweek.com/e-commerce/china-limits-use-of-virtual-currency/d/d-id/1080926

imho there are far more serious issues for your government to deal with, i'll just list the most serious ones:

tax evasion
- http://money.cnn.com/2014/02/09/news/economy/china-tax/

corrupted politburo
http://www.newyorker.com/online/blogs/newsdesk/2014/04/how-far-will-chinas-anti-corruption-fifteen-billion-dollar-purge-go.html

property bubble that PBOC itself created which is now bursting (this one is a serious shitstorm)
http://usa.chinadaily.com.cn/opinion/2014-02/26/content_17305583.htm

FED's QE tapering which china says is not really concerned about but in reality they are... look at what's happening now..

http://www.scmp.com/business/economy/article/1386189/feds-qe-taper-risks-slowing-chinese-reforms
http://www.reuters.com/article/2014/03/19/hongkong-property-chinese-idUSL3N0MG1B220140319

now capital flight is just another bs, pboc is smart enough to just invalidate and purge it from its system... yuan stability? then why let it trade offshore? actually yuan devaluation is just another tactic in currency war handbook... it's very much welcome in china because it helps maintain its export competitiveness... i personally think if pboc really moves against bitcoin then it means it's going to acknowledge that it's not that harmless as you say it is, that means deep down there it's raising eyebrows... in that case trust me it won't need to wait for imaginary April 15 or April 17, it will simply be like SWAT team all over the exchange offices... also if you look at those dumps don't assume someone is losing his shirt in china, it's just same bunch of traders taking money from right pocket and putting it in their left pocket, but the goal which is illusion has been achieved... it's going to be same bunch of people that will move the market in china anyway they want...

PS. honestly i don't really care how this fud turns out in china, i'm all in and pretty comfortable with it, in fact i would've bought more if i had the opportunity... also i can't thank enough all those fudsters and trolls who keep spreading fear because a month ago i thought i wouldn't be able to buy at these prices...

here is an update to the situation in china

ching chong ding dong ..crsipy fried chicken and duck sauce ...dim sims with special fried rice and a pork bun

ning nong ching chong and wing wong and his 5 brothers

It all makes sense  :D

thanks jackass

free prawn crackers with delivery ?

One day your people will wake up and take that God-given right to liberty of person and freedom of decision.  

That generation of patriots did it in the US many years ago, and you will do it too.

lmao US are everything but free. fools. ;D

Given the anti-corruption drive that the new Chinese leadership embarked on last year is it not likely that certain more tech savvy, slightly misinformed, but entirely corrupt individuals within the People's Republic thought that they could use bitcoin as a way to move their wealth to places that the Chinese authorities would be unable to trace them? (think bitcoin is anonymous - misinformed)
This might explain the desperate acquisition of coins on Chinese Exchanges in the last month or two of 2013 as well as the fact that the recycling of these coins onto western exchanges has depressed the price since. (by this I mean down to the 800/600 area.)
By this stage I would expect that these individuals are already out of bitcoin and in USD or EUR in bank accounts all over the world.
When the Chinese leadership officials caught on to the wheeze, it would be an obvious and simple step for them to stamp on it, hard, this has forced others in China who were involved for less nefarious reasons to exit the market or scale back their investments - driving us to this $400 area.

It may also explain why exchanges are being targeted piecemeal - those more guilty (in the eyes of the leadership), or least protected politically - are punished/closed/impacted first with others later or to a lesser extent.

this is possible but with very tiny probability, because ultra rich don't trust bitcoin yet and rely on moving their shady money via other proven and more anonymous ways compared to using some exchange that won't save you in court if shit hits the fan.. one thing you need to remember if you wanted to anonymously move your funds out then it would've been suitcases of cash instead of bank wire and if there were ever such attempts bitcoin would've easily hit multiples of where we are now... also the kind of volume that was dumped on bitstamp and btce is miniscule to what was dumped on huobi... so again don't be deceived by illusion that attemps to portray panic as it is created by simply taking bitcoins from right pocket and moving to left pocket, rest is just accounting work...

I support this view.

For those who weren't following closely, BTCChina and Huobi recently had announcements, and I think they don't have the political support many speculated that they do. They seems to be confident that they have good channels to know the intention from above, but for now they don't know more. From the announcements, you can read that they don't think they have the level of political support they need. -- Either they really don't, or, they do have political support from the investors side, but investors wish to remain silent on why the companies they invested are so lucky.

Right now, the capital, potential profit of bitcoin, is too paltry for those with strong government background to participate. The attention put on bitcoin is unusual: PBOC usually doesn't care such small-timers. I think the possibility that exchanges have needed political support is tiny.

Also, FxBTC and BTER are not registered companies in China. I don't know the other two recently-out-of-business exchanges: BT38 and BTCIG. They were small. BTCChina, Huobi, OKCoin, CHBTC each have a company and at least 10 million CNY capital (1.67 m$). (I had the impression BTER had Canadian venture capital funding, but I don't think they have a physical presence in China.) It is also possible that the smaller targets can be taken out without too much noise.

ty for your posts, really interesting.

could you please confirm if the following statements are true:
- huobi stops withdrawls/funding with third party payment processors tonight (prepaid-cards).
- after 15th of april third parties are not allowed to deal as middle man between banks and bitcoin exchanges anymore.
- you can withdraw from and fund fiat to exchanges using bank transfer.

I am not their user. I read the same news in Chinese and do not doubt this.


This was already banned in December 2013, but no one punish the violation: PBOC seems to believed sheer threat would work. Now 3rd parties are getting orders directly, individually. There is still no one assigned to punish the violation (as far as I know) but they will not ignore direct orders. Conclusion: TRUE.


You haven't read the news? Among 15 named exchanges, BT38, BTER, FXBTC ceased to offer any way to fund fiat = only out, no in, opposite of MtGox fiasco. BTCIG is even worse, website is down. On withdraw: FxBTC's bank forced them to cease offering cash withdraw with bank transfer, their users are hurrying to withdraw from 3rd party before 15th, at which time it will offer no in, no out. Other exchanges (except the now-offline BTCIG) allows fiat withdraw with bank transfer.

FxBTC is a strange case, the only one who ceased bank-transfer withdraw. Sometimes local official over-execute higher orders in attempt to endear themselves to the above, I think FxBTC is simply unlucky to work with such an official. But it can also be possible as a deliberate move to make withdraw harder - FxBTC charges the highest bitcoin withdraw fee (0.01฿), a behaviour MtGox adopted when they can't fix TM bug, hinting FxBTC also had the same bug and perhaps lost some coins. With this considered, FxBTC users should withdraw now.

I wrote an editorial in detail (the site is in German but an English version is available after a small payment):
http://bitcoinblog.de/2014/04/03/exklusiv-eine-chinesische-perspektive-auf-die-situation-in-china/

sry what i mean was that huobi and btcchina continue bank transfers or at least they say that they will continue.
did the small exchanges offer funding via bank transfer before? i thought they only used third parties for funding. so if they lose their only option to fund then all funding is stopped.


from the distance it looks like the pboc's aim is to make it more complicated to create and operate an exchange. this way they only have to deal with a few large exchanges and not with all the small ones.

Its not hard to understand why pboc want to ban bitcoin.

* chinese people put a lot of money into bitcoin, so much that other countries now also are thinking about what to do about it.
* there were 2 exchanges that stole the money from the people
* the exchanges had been using private accounts.
* china want chinese to use unionpay and they want to export it. So they crippled alipay and tenpay, Issued a document about bitcoin in december which nobody cared about.
* There are big corruption scandals in china that probably involves bitcoins and its about billions of dollars.

The only problem is how hard they are going to enforce the ban.



 

I don't think so. I think BTER is the only exchange that only used third parties for funding. There are 4 effected exchanges, that is 1:4 ratio.

China didn't ban Bitcoin.  They didn't ban a single exchange.  They haven't outlawed privater or business use of bitcoin.

They did, however, entirely ban their financial institutions / payment processors from interfacing with the exchanges.  It is very, very hard now for Chinese to buy bitcoins or cash out into yaun.  It's virtually impossible for businesses to cash out into yaun after receiving bitcoin.

China is basically out of the speculation game, but nothing has changed if people want to buy/sell in bitcoin and receive bitcoin.

The real question is: how much of that mainland yaun is gonna get offshored? ;)

@zhangweiwu
I just want to say I feel so sorry for chinese People and chinese bitcoiners

No need to say sorry.
They are strong people and eventually find a solution that can be used by other exchanges throughout the world who also have difficulties with their own government.
www.f2pool.com is already second biggest pool in the world.

They can still use casinos or roll the dice, i don´t think that much tears will be shed.

What the fuck is a yaun? It makes me want to take a nap.

all chinese bitcoiners ready to flee to US? ^^

-> http://money.cnn.com/2014/03/25/news/economy/china-us-immigrant-visa/ (http://money.cnn.com/2014/03/25/news/economy/china-us-immigrant-visa/)

It's great to have insight from a man on the ground over there. Much appreciated Zhang, please keep us informed.

I will do so from http://bitcoinblog.de/ in the future. The two latest article I wrote for it are:
http://bitcoinblog.de/2014/04/16/china-if-bitcoin-remains-small-it-will-be-allowed-to-live/
http://bitcoinblog.de/2014/04/12/its-not-a-survivors-game-its-a-losers-game/

No offense, but everything you write seems to push the Bear stance.  Please read the beginning of your own 4/12 story.  "... the Chinese think China is the world..."  Developments in China do not necessarily mean USD/BTC will plummet.  Perhaps you hold a short position.

At any rate, the Chinese cannot print an infinite amount of BTC to sell.  The best they can do is vastly increase mining, which would be very visible.  Once their BTC runs out, they lose the ability to depress USD/BTC price with manipulations on the BTC side.  Perhaps they'd like to try their hands at propping up the USD instead?  That will be the only thing left.

Not true: you haven't read this, I push for Bull stance back in Oct 2013 before the great great China bubble:

https://bitcointalk.org/index.php?topic=315380.0 (the price was below $200 by then)

I don't always sing the doom song, only that I have a cold cold heart (down-to-the-ground approach, no emotion involved in speculation).

I agree China factor is limited - govt is determined to make china unimportant to world.

P.S. Not sure what "push for .. stance" means in English, if you mean influnce the market: of course we can't.

Push in this sense, means sell or promote.

i.e. Drug Pusher = Drug Dealer.

Looking forward to your next article when it arrives!

First thank you to the OP for your insights and perspective. What I see here is that this would work if Bitcoin was limited to China and "The West" has little of no say in the matter. Up to now "The West" has actually played along responding to the PBOC signals by depressing the price, so everything for the time being is harmonious. My take is that sooner or later "The West" will stop playing along and drive the BTC/USD rate and by implication the BTC/CNY and BTC/CNH rates to meteoric new highs. The question then becomes what will the master do when presented with a situation where the master and also the servant has no control?

As BTC/USD increases, BTC/CNY must increase due to arbitrage, as it is technically unfeasible to completely stop bitcoin trading in China.

If this happens (which I believe definitely will), they will look like the biggest dickhead of this century. They will shutdown all centralized exchanges in China. However, as they have already cut off the fiat channels for the exchanges, they will soon become zombie and irrelevant to the rest of the world

They will also turn on their brainwashing propaganda machine to defame bitcoin (They are doing this NOW). However, smart Chinese people will not give a shit and will keep buying and holding. Those stupid brainwashed Chinese people have already left the game in the past few months, so they are irrelevant.

If you don't believe me, look at Twitter, Facebook, and Google. They are all banned in China, while their market cap is still several magnitudes higher than bitcoin.

+1 ,as always.OP !

Hey, thanks for the articles.  Very nicely written.

On the second one though, I have to debate you on a few topics:

"Even Bitcoin’s global events seem to support this vast ego. China was the reason for the last bitcoin peak, and it’s the reason for its fall. Western news still maintains that 83% of bitcoins are traded in USD. ‘It must be fake’ say the Chinese bitcoin players. ‘The West faked their trade volume. The truth is that 83% of bitcoins are traded in CNY and USD traders are just following our lead, over-reacting to our market movements from time to time.’ Facing the Bitcoin Foundation’s failure, the Chinese started Bit Foundation, and although the imitation version is rarely mentioned in the west, the original was rarely heard of in China. And when the west is sick of China crying wolf about the ‘ban’, the Chinese are sick of westerners ‘spreading rumours’. ‘Trust no more English sources please’, one person said at a Bitcoin event."

This is just laughable.  Do Chinese bitcoiners really believe that the West is just overreacting whenever a Chinese news source prints FUD of another 'ban', and it's clearly Huobi, OKCoin, and BTCChina LEADING the sell off, not Bitstamp or Bitfinex?  Do Chinese bitcoiners really believe that they can't trust English news sources on bitcoin, but CAN trust Chinese news sources? (if so, then wow).

Can you also tell me why Chinese bitcoiners trust the Chinese exchanges so much over the Western exchanges, when none of the Chinese exchanges have submitted themselves to an unbiased proof-of-reserve audit of their holdings?  Just blind trust, huh?

"...Americans talk of alibaba as yet another Chinese imitation. Yet Alibaba win a PR favor in China by never touching morality topic, never shy away from a fierce fight – with such an image a western company is doomed to fail, in the West."

What does this mean?  And if means what I think it means, then tell me how the Chinese exchanges are not just bowing down to the PBOC and not shying away from a fierce fight?

I wrote answer to your questions, but I realized it is off topic before posting, so will you be so kind to post it there on the bitcoinblog.de and I'll paste my answer there? Or you can post to the reddit page of this article and I'll follow up there. I can answer the last part here because the last one question challanged my logic.

"What does this mean?  And if means what I think it means, then tell me how the Chinese exchanges are not just bowing down to the PBOC and not shying away from a fierce fight?"

Answer: Isreal bow to their God and do not shy away from the fierce battles. You don't fight God, however you can fight your enemy in the competition of who can do more bows to to God per minute (or how many hours you bow to your God without resting). Smarter fighters guess God's intention and execute it without being ordered, thus win battles by gaining God's favor. (PBOC is not God himself, but the government is a united body, the communist party is the soul, which is God. nothing co-signed by 5-ministries are not party's will so you bow to it.)

In my article I consistantly use the world "Lord" for the central government. Here I use God for the party to make a stronger point. You will notice that in my Bitcoin speculation articles, I am consitantly speculating the Lord's intention, a skill I received training in China and most senior managers are well trained of. My latest article published today is also a speculation of Lord's intention, but only German version is published - English perhaps tomorrow:
http://bitcoinblog.de/2014/05/11/china-der-bitcoin-ist-kein-ungezogenes-kind-er-ist-falsch-geboren/

Interesting. Thanks for your valuable perspective!

Thanks for the reply.  I guess in the West we really do see things differently, as here we hardly see bowing down to the government or authority as "putting up a fierce fight."  Quite the opposite, we see it as cowardliness, as fear, as giving in.  Survival at the expense of freedom (that is, not having so many severe restrictions that daily business becomes impossible) is not survival at all.  It is oppression.  It is living in a prison.

Also in the West, our government would NEVER allow pro-bitcoin infomercials to be run on national/state television, thus giving stamp of approval encouraging our people to buy it, and then turn around 6 months later and basically outlaw it.

Thanks for pointing out. Having watched Rigoletto a few years ago I started to consider the difference between China and the West is more like the difference between "Medieval and Enlightenment", than the difference between "Confucius and Socrates". That is, if Shakespeare comes to China now, he feels more homy (culture-speaking) than if he comes to current day England.

thanks for posting.
As a german I appreciate it very much

zhangweiwu,

Would you say that it is likely that the way this continues with the Chinese exchanges defying the PBOC is, there will be a first arrest/raid of an exchange?

the warrants are probably written, the bullets yet to be paid for

i heard that in china, they make the condemned's family pay for da bullet?

Well, there is no way to not to defy the PBOC at all. "How to train your dragon" has this in the cartoon:

"The problem is HERE!"
"You just pointed at all of me!"

Their existance is an offence.

There will unlikely be an arrest / raid, because that sort of thing should happen before the event escalate to central government, when the central government can always blame lower level for the blood. Since this issue is brought to central (The Lord) as early as Dec 2013, there is no space for bloody action. You won't hear someone buying execution bullet with 0.001฿, sorry. Put to consideration of foreign capital involvement, bloody action backfires PR trouble. I had speculated the possibility of blood and picturesque scene, but that was in October before PBOC announcement. After PBOC announcement, no blood. Your life is guaranteed.

What more likely is a strong ban, a national 'illegal exchanges cleanse' action to rule the exchanges outlaw and ask them to settle and stop exchange business before a certain date. They may also take down a few non-bitcoin exchanges, e.g. underground stock broker, to weaken Bitcoin's publicity and to incriminate Bitcoin by putting it together with other guilty financial schemes.

The second on the candidate list is a ban from non-PBOC entity (most likely Ministry of Industry and Information or Ministry of Commerce) for any commercial activities related to Bitcoin - this second possibility won't happen in May, because one weak ban after anther weak ban in short interval weakens Lord's image. After all you should fear the Lord, not to play hide-and-seek.

The third is our Lord's backup plan. Question one exchange about insolvency (typically largest of all targets), force it to actually be insolvency, and use state media propoganda machine to paint Bitcoin evil and black, from birth, with news, documentaries, radio etc etc. This plan is really not needed: as "Art of War" said, letting it die peacefully is better than killing it in fight, and thanks to the Internet, change attitude that radically would harm the reign. It happens only if die-hard bitcoin believers started some activities that calls a lot of atention OR the state decide to take down a die-hard enemy similar in influnce of Bitcoin, and by killing Bitcoin in a confrontation, save the need to do it again for a harder enemy (for the time being, the harder enemy is either P2P lending business or Alibaba, but Alibaba is too smart to need a lesson to teach them, so only P2P lending is left). Both conditions for this level of confrontation are unlikely to happen.

The last outcome: if exchanges all choose to go out of the country, or just do business with cash-at-door on tiny scale, or just choose to close (FxBTC), not trying hosting P2P trading, not trying ATM or vendor machines, then PBOC will say nothing more. However this is also unlikely to happen.

exactly

Yes: http://en.wikipedia.org/wiki/Lin_Zhao (not mentioned in the English wikipedia)

http://upload.wikimedia.org/wikipedia/commons/thumb/2/28/LIN_Zhao.jpg/160px-LIN_Zhao.jpg

Wouldn't this course of action be a whole lot simpler for everyone? (in an ideal world of course)

P2P trading is fine, because there is no need to establish a P2P trading site in China and the operator could remain mostly anonymous. Just like the first P2P trading site in China, they intentionally refuse to register (beian) with the government: https://bitcointalk.org/index.php?topic=589158.msg6472369#msg6472369 .

Another question for you zhangweiwu:

One of your articles discusses the notion that if "bitcoin remains small, the Chinese exchanges will be allowed to live."

So in that context, if the Chinese exchange operators know this, then how do you know that it's not the Chinese exchange operators themselves that are spreading false bitcoin news to incite panic and keep the price suppressed?  Or perhaps even using other unethical or shady means to do so?  Wouldn't it be in their best interests that the bitcoin price never rises ever again, and a rally never happen again, so that they get to stay in the PBOC's good graces and thus stay in business indefinitely?  I would think that they really don't care what the btc exchange rate is, as long as the fees keep coming in and they are not shut down.

I too would be interested in the answer to this question. I think its difficult to get a hold of how big Bitcoin actually is in any country and also how much money exchanges are actually dealing with.

At the end of the day an exchange may do $1mm of a trade a day but most of that is internal database stuff, the actual amount coming into and out of the exchange is likely nowhere near that an I wouldn't of thought it would even be enough to get central government interested.