When nothing is real – to take a Lennon line – there’s nothing to get hung about.
Bitcoin, to put it mildly, has lost China. To be more specific, China has banned transactions involving cryptos, marking them as illegal. That, of course, includes bitcoin.
That blanket ban seems to set up a greenfield opportunity for central bank efforts to bring digital yuan into the mix, to be used across a variety of use cases in retail and commercial settings.
The exodus has already begun in earnest, as two of the world’s biggest bitcoin exchanges – Huobi and Binance – stopped taking users from China, with the former on track to close accounts based in mainland China.
But the price of bitcoin, arguably the 800-pound gorilla in the space, as measured by market cap – and certainly as a proxy for cryptos in general – has remained surprisingly resilient.
At a recent quote of about $43,566, bitcoin is trading lower than it was last week when the ban was announced – but not by much, considering that back then, the price was about $1,000 higher. The recent trading action is significantly above the recent nadir of around $41,300 seen in the wake of the announcements from Chinese authorities.
Now, the “market share” of a certain country tied to any single crypto may be tough to pin down, and would fluctuate depending on sentiment. But recent reports in publications like The Wall Street Journal, per statements from Huobi executives, peg that crypto’s volume from the rest of the world at around 70%; that leaves 30% of volume stemming from China.
With at least double-digit contributions from China for these exchanges, it stands to reason that the price would, well … tank. And yet, as noted above, that has not happened.
To draw a parallel: What would happen if, say, China effectively banned Apple – which, depending on the quarter, could mean that a high teens (or greater) percentage of the top line would disappear? The reaction on the Street among buyers and sellers would point in one direction: down.
Yet bitcoin’s buoyancy begs the question: Just what is the price based on? It might be the case that the latest China news, upon reflection, is sparking a “ho-hum” reaction. After all, China has tried, via varying regulatory salvos in past years, to stamp out bitcoin. But in this latest effort, there’s a concerted push by 10 agencies to put an end to the mining and trading.
The assumption, then, is that bitcoin-related activity will simply go somewhere else. Hong Kong is still a viable market for trading. And in at least one market, El Salvador, we’re seeing the uneven ride toward the long-promised use as currency.
The speculation seems to be rooted in the promise that bitcoin will find its place and its level in markets outside of China. Companies like PayPal are launching super apps that bring crypto into the fold. And, as PYMNTS has noted in past studies, as much as 18% of the population would use crypto in everyday commerce, which translates into tens of millions of consumers.
For now, at least speculation is speculation – waiting for something that has yet to materialize, and may not (at least not in the expected fashion). So, in that vein, the price can be whatever one wants it to be.
Which begs another Lennon song title: Imagine.