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The Bitcoin market ended the week as it began – trying to sort out how far the Chinese central bank will go in its crackdown on the Chinese exchanges, and how that might affect Bitcoin prices everywhere else in the world.
Mainstream Chinese news outlet Caixin Online was the first to report last week that the People’s Bank of China (PBOC) was planning to force Chinese banks to close any accounts they have with Bitcoin exchanges by April 15.
None of the Chinese exchanges had heard from the PBOC, but a Wall Street Journal article on Tuesday confirmed the Caixin report. And on Wednesday two Chinese Bitcoin exchanges, OKCoin and FXBTC, said that some financial partners had informed them of intentions to terminate their accounts.
The prospect that the Chinese could be forced out of the Bitcoin market caused the CoinDesk Bitcoin Price Index to plunge from $585 last Wednesday to a low of $416 yesterday (Thursday).
Earlier today (Friday), the chief executive officer of the BTC China exchange, Bobby Lee, tried to dispel some of those fears in an open letter.
Lee made it clear he still isn’t sure what the PBOC has in mind and stressed that people were panicking more out of fear of the unknown than what the PBOC might actually do.
“We just don’t know what the outcome will be,” Lee told CoinDesk. “At this stage, it’s too early for me to speculate on the options we have. We just don’t know enough right now.”
In his open letter, Lee expressed willingness to “actively communicate with the regulatory authorities” to develop rules governing Bitcoin. He also noted that since the true value of Bitcoin comes from the fact that it is Internet-based, the short-term fluctuations in the Bitcoin markets should not affect the digital currency in the long run.
On Friday the Bitcoin market recovered somewhat, with prices hovering between $440 and $450 for most of the day. Depending on what the PBOC actually does, Bitcoin prices could suffer further drops in the days and weeks ahead.
In other corners of the Bitcoin world this week…
Congress Takes Another Look at the Bitcoin Market
The U.S. House of Representatives Committee on Small Business held a hearing on Wednesday to look at the pros and cons of Bitcoin for small businesses. It was latest of several hearings on the digital currency to take place in Congress, which for the most part seems more curious about Bitcoin than anything else.
Said Committee Chairman Sam Graves, R-MO: “We hope that by providing information about Bitcoin, small businesses will be in a better position to know whether adopting Bitcoin as a payment system might be a way for small businesses to gain more customers. This hearing will also inform [Congress] Members as we consider implications of policies affecting the use of virtual currency.”
Much of the hearing focused on the risk, as well as the advantages, of small businesses accepting Bitcoin. While not quite as significant as last weeks’ IRS announcement on the tax treatment of Bitcoin, it shows the digital currency remains on Washington’s radar.
Meanwhile, Robocoin has invited all members of Congress to a demonstration of its Bitcoin ATMs on Capitol Hill on Tuesday, April 8. No word yet on how many lawmakers plan to attend…
Quick Bitcoin Hits
- Bitcoin to $1 million? In an interview with The Wall Street Journal, Wences Casares, CEO of the Bitcoin wallet startup Xapo, said he believed Bitcoin prices could rise to as high as $1 million over the next decade.
- Mt. Gox story gets uglier: Over the weekend reports surfaced that officials of the bankrupt Mt. Gox Bitcoin exchange used money from customer accounts to pay for operating expenses. Those allegations came from several anonymous former Mt. Gox employees who spoke to Reuters. Mt. Gox announced in February that it had “lost” 750,000 customer bitcoins and filed for bankruptcy a few weeks later.
- More on Gox: U.S. Bankruptcy Judge Stacey Jernigan this week ordered CEO Mark Karpeles to appear at an April 17 hearing in Dallas to answer questions about the Mt. Gox bankruptcy. The Tokyo-based Bitcoin exchange filed for Chapter 15 bankruptcy in the U.S. last month, in part to protect itself from a class action suit that has been filed in Chicago.
- “Adapt or Die”: Economist David Andolfatto, a vice president at the Federal Reserve Bank of St. Louis, gave a talk on Monday on the “possibilities and pitfalls” of Bitcoin. While not without its flaws, Andolfatto predicted that digital currencies will ignite changes in current money and payment systems that will force “traditional institutions to adapt or die.”
Do you think the PBOC plans to ban Bitcoin outright, or is the Chinese central bank just fumbling for the right policy on digital currencies, much like other regulators around the world? Chime in on Twitter @moneymorning or Facebook using #bitcoinnews.
Investing in Bitcoin isn’t terribly easy right now, but for the daring there is one risky option – Bitcoin penny stocks. They could go broke… or make you rich…
The post The Bitcoin Market Continues to Be Rocked by China Uncertainty appeared first on Money Morning – Only the News You Can Profit From. The views expressed are not those of The Wall Street Examiner or its publisher.