The cryptocurrency markets are blood red again as rumors circulate that China plans to shutter Bitcoin exchanges. This news comes on the heels of Chinese regulators outright banning ICO’s last week. However, all current information suggests Chinese authorities have not taken action. It looks like China could be crying wolf, since little evidence currently exists for a government-lead exchange shutdown.
Also read: Professor Urges New Zealand Government to Develop Bitcoin Regulations
Truth of Government Action Currently Unconfirmed
The accuracy of the Chinese news sources is also unconfirmed. Chinese news source Caixin elaborated on what is going on, but did not provide hard proof of the proposed closings.
The site said; “The supervisory authority has decided to close virtual currency exchanges in China, which involves all virtual currencies and denominations kept by ‘OKcoin,’ ‘Bitcoin China,’ and others. The new financial reporter from the Internet financial risk special rectification Work leading group confirmed the news. Allegedly, government agents intend on deploying a resolution shortly.”
A CNledger Twitter post, however, contradicted Caixin, saying, there is plenty of fake news circulating and nothing is confirmed. They said, “Lot’s of false news. Don’t believe them unless they’re confirmed or verified. Up to now, no exchange is forced to close, no body is arrested.”
Lot's of false news. Don't believe them unless they're confirmed or verified. Up to now, no exchange is forced to close, no body is arrested pic.twitter.com/puCQVBJH5u
— cnLedger (@cnLedger) September 6, 2017
Cnledger even asked a couple of exchanges if they had any notice of shutdown. They replied they have not gotten any notice and are continuing to operate as normal.
Regarding tonight's rumours, we asked representatives from okc & huobi, they have not received any notice and they're operating normally
— cnLedger (@cnLedger) September 8, 2017
Market consequences of Unconfirmed News
The interesting thing about spreading unconfirmed news or crying wolf, is that it impacts the markets. When fear circulates throughout the ecosystem, weak hands are scared into action. They begin selling tokens. A panic ensues. More weak hands sell, and the market sees a temporary selloff.
According to Coinmarketcap, US cryptocurrency markets are down 7.3%. This is likely a direct result of the market scare based on this news of alleged Chinese exchange shutdowns, but without undeniable evidence of any action on part of regulators.
Bitcoin price after the news of a possible Chinese exchange shuttering. Source: Coinmarketcap
Furthermore, anyone who foresaw the event or had insider knowledge would be able to gain lucrative returns from the panic. They could sell on the top, make a profit, and then buyback on the low. The cycle continues. This lesson illustrates how markets can be manipulated based on news alone, without necessary action.
Affect on Bitcoin; Chinese Authoritarian Mindset
If the shutdown happens to be true and come to fruition, some commentators say bitcoin will not be as affected since it’s not an ICO. Nonetheless, it is good to keep in mind that China does appear to harbor one of the most authoritarian mindsets regarding cryptocurrencies. To date, their concern with cryptocurrencies seem to have led to the most heavy-handed actions toward the digital assets. But whether the recent rumors are true remains to be seen.
Hopefully, they are not crying wolf when the wolf might not be around.
Do you think China is crying wolf? Are there people profiting from spreading potential FUD? Let us know in the comments section below.
Images courtesy of Shutterstock, Coinmarketcap, and Progressive Radio Network
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