[2017-01-20] The worst case speculation after PBOC inspection

[hl5460]

POBC inspection team released an official briefing on 18th Jan  , which hammered down the price to around 5,700 yuan, or around 7%. The briefing is concise but also contains rich implications. We may speculate the best and the worst outcome of this event by reading between the lines.
The briefing reads:


http://news.8btc.com/the-worst-case-for-bitcoin-exchangs-after-inspection-by-pboc

[1Referee]

I think it's a great thing that people can no longer trade there with borrowed money. Especially when you consider how much volatility the price was experiencing as result of that. It's basically gambling that they do with money they don't really have. I hope that this will lead to less intensive fluctuations and thus a more stable (as far as possible) market. I just wonder what it will do with their trading volumes when these giant exchanges (huobi, okcoin, btcchina) start implementing fee based trading as is the case with western exchanges. It of course won't wipe out their fake volumes entirely, but we'll definitely notice a significant difference.

But then again, I am sure that these exchanges will look for ways to avoid these regulations to still offer people the opportunity to trade with borrowed money. Especially when you consider that it was/is a very profitable aspect of their business. I don't think they will give up on that so easily.

[zby]

If you read between the lines, the best thing to happen would be all user funds (fiats) would be stored via third party custody. However the “third party custody” is in direct contradiction against the regulation requirement released by PBOC and other regulatory authorities in 2013, which asked financial institutions and payment processors not to provide customers with service directly or indirectly related to Bitcoin.

Hmm - this sounds like a problem.

[Idrisu]

If you read between the lines, the best thing to happen would be all user funds (fiats) would be stored via third party custody. However the “third party custody” is in direct contradiction against the regulation requirement released by PBOC and other regulatory authorities in 2013, which asked financial institutions and payment processors not to provide customers with service directly or indirectly related to Bitcoin.

Hmm - this sounds like a problem.

it's not a problem, as the only problem cryptocurrencies has currently compared to fiat money is volatility and fluctuations of price due to margin traders who wants to makes money. The pboc has come up with a more genuine guidelines for bitcoin and other cryptocurrencies. Though the discussion between okcion, bitcc and others exchangers with people bank of china impact the market negatively, but the over all benefits will be more than negative impact in the long run. Let keep folding our hands and see how the event will unfold some days from now.

[maku]

So, we had small price drop caused by aftermath of this news: http://news.8btc.com/the-worst-case-for-bitcoin-exchangs-after-inspection-by-pboc
But when you read this article, you will realize that PBOC actually fixed some 'exploits' on Chinese exchanges.

"Loaning was the common business practice on the 3 Bitcoin exchanges to support margin trade up to 5x.
A 0.1%-0.5% transaction fee was charged when traders initiated such a transaction. It’s believed that the margin trading fee was to compensate the 0 fee"

It is positive change that traders can no longer trade there with borrowed money.

[TraderTimm]

Blah-fucking-blah.

The Chinese exchanges have been inflating volume and other hi-jinks for as long as anyone can recall. So what if they're finally being beat into compliance, it was going to happen eventually. So we'll see less bullshit price swings from highly leveraged chinese traders -- that's a good thing.

Maybe we would have held on to our 1,000 rally if these knob-gobblers hadn't been leveraged all to hell and back and liquidated.

[notthematrix]

leveraged coins is like trading without the coins....
If a exchange allows this its good PBOC stoped this...
the dump was fake so next time hold non leveraged  coins
HOLD THEM!
Remember the Limit is 21.000.000 if they leverage and they cant get the supporting coins the exchange has a real big problem!
Thats why you only should trust non leveraged exchanges!

[richardsNY]

If this in the long run proves that it diminishes the level of volatility, then I think this is the best thing that happened to Bitcoin in recent years. Volatility plays a major role as to why the average joe type of people are holding back. But as with all things, if doors are closing at one place, elsewhere they will open up again. It eventually may result in traders shifting to other countries where these regulations don't apply. If you look at it from that point, the problem will only move but not completely vanish.

[notthematrix]

If this in the long run proves that it diminishes the level of volatility, then I think this is the best thing that happened to Bitcoin in recent years. Volatility plays a major role as to why the average joe type of people are holding back. But as with all things, if doors are closing at one place, elsewhere they will open up again. It eventually may result in traders shifting to other countries where these regulations don't apply. If you look at it from that point, the problem will only move but not completely vanish.

There is a major difference between BTC and fiat.

21.000.000 will be all there is en ever will be in bitcoins.
Unlike fiat money were it endlessly can be printed , this 21.000.000 max suppley does not allow leveraged trading....
Leveraged trading can only appear in a fiat money system were money can be crated from thin air!
If they do leveraged trading  in BTC they will end up not having/owning the BTC's they are trading  what will kill a exchange in a instance!
that's why you always need blockchain proof!
If you cant find bitcoins in your wallet address back in the btc blockchain...
there is a good change those btc do not exist.

[darkangel11]

I always find it funny that they remind themselves of bitcoin every time there's a rally. It was like that in 2014 and we have it again in 2017. They didn't care how the exchanges were operating in 2016, because the price wasn't spiking, but now it's hunting season again. I think some of those legislators and inspectors are traders and investors, or somebody is paying them to work harder when he wants to manipulate the price.

[notthematrix]

I always find it funny that they remind themselves of bitcoin every time there's a rally. It was like that in 2014 and we have it again in 2017. They didn't care how the exchanges were operating in 2016, because the price wasn't spiking, but now it's hunting season again. I think some of those legislators and inspectors are traders and investors, or somebody is paying them to work harder when he wants to manipulate the price.

I am here since the beginning the press makes up story's payed  by investors , this happens anywhere in the market , these stories INCLUDE regulater  stories , the truth is this.
https://www.youtube.com/watch?v=cd7GBJOG4os and there will be only 21.000.000 max supply.
so price dumping is very hard , in a non leveraged system unlike fiat so you can only dump your coins once!
Bitcoin is unlike fractional reserve fiat were you can make new coins and dump them over and over again!
The rest is emotional blah blah.
 
 

 

[hl5460]

Blah-fucking-blah.

The Chinese exchanges have been inflating volume and other hi-jinks for as long as anyone can recall. So what if they're finally being beat into compliance, it was going to happen eventually. So we'll see less bullshit price swings from highly leveraged chinese traders -- that's a good thing.

Maybe we would have held on to our 1,000 rally if these knob-gobblers hadn't been leveraged all to hell and back and liquidated.

1. Liquidity shortage
This is already happening. The transaction volume of 3 exchanges has dropped significantly as visualized by Willy Woo:

willy-woo-analysis
Without margin trade and loaning, automated traders may retreat from the market and turn to other assets. However, as mentioned by a professional trader, the API provided by these exchanges is best suited for bot-trading, which could not be found elsewhere. And the non-stop trading hours of exchanges across the world has no counterpart in other markets.
2. No more 0 transaction fee
It’s likely. Loaning was the common business practice on the 3 Bitcoin exchanges to support margin trade up to 5x. A 0.1%-0.5% transaction fee was charged when traders initiated such a transaction. It’s believed that the margin trading fee was to compensate the 0 fee of normal Bitcoin trade and also the major source of income for these exchanges. By the way, these three exchanges have 100 to 300 full-time staff.
3. Exchange shutdown
As for a total shutdown of bitcoin exchange, most people assumed it would be unlikely. There is no mention of “illegal” wording in the briefing, thus “shutting down” has no legal support. Besides it would be a deadly blow to the emerging trend of blockchain applications, in which Chinese companies have invested thousands of millions. “illegal bitcoin trading” may lead to another question: “is blockchain legal?”.

[TraderTimm]

"Drop in liquidity".... yeah, sure thing.

All I know is we've ground steadily higher above 1,000 without a Chinese leverage party to crash the gates this time. So you can take your quotables and shove them where the sun doesn't shine.

[maku]

"Drop in liquidity".... yeah, sure thing.

All I know is we've ground steadily higher above 1,000 without a Chinese leverage party to crash the gates this time. So you can take your quotables and shove them where the sun doesn't shine.

I wish it was really the case this time. I's love to see that current bubble is organic and sustainable, that with $1000 we reached new price floor.
But from what I see there is always something that will pop up and crash the bulls party, with first ATH it was MtGox crash, with second, earlier this year it was PBOC intervention.
I wonder what it will be now.

[hl5460]

"Drop in liquidity".... yeah, sure thing.

All I know is we've ground steadily higher above 1,000 without a Chinese leverage party to crash the gates this time. So you can take your quotables and shove them where the sun doesn't shine.

I wish it was really the case this time. I's love to see that current bubble is organic and sustainable, that with $1000 we reached new price floor.
But from what I see there is always something that will pop up and crash the bulls party, with first ATH it was MtGox crash, with second, earlier this year it was PBOC intervention.
I wonder what it will be now.

Organic and sustainable at 1M blocksize. Any room for further growth?