Understanding the Chinese Government’s Approach to Cryptocurrency

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With the world’s largest population and a rapidly-developing economy, China is perhaps the most important country for the long-term prospects of cryptocurrencies such as bitcoin. China’s low energy costs have made it the world center of bitcoin mining, but the government’s uneven stance toward this new technology has caused massive fluctuations in bitcoin’s value.

On September 2, 2017, bitcoin hit an all-time high of $5,000. The price tumbled almost immediately, then collapsed to $3,018 on September 4 as China announced it was banning all initial coin offerings (ICOs) and suspending trading on all bitcoin exchanges.

While many observers initially thought China’s new stance might mean the long-predicted bursting of the bitcoin bubble, its value recovered quickly and began trending upward again immediately after the dip. Some believers in bitcoin’s potential to become a truly borderless currency beyond any government’s control cheered this development, thinking that China had shown they held less long-term influence over bitcoin than many thought.

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