An unprecedented hunt for bitcoin transactions has begun. A reporter from the Financial Associated Press was informed that various localities are currently rectifying the Bitcoin and other cryptocurrency industries from various aspects. The “OTC business” that bypasses the bank’s monitoring system, the mining industry and exchanges in the upstream supply chain of speculating coins are all subject to different restrictions. Some exchanges and mines have begun to consider the possibility of overseas development.
At the same time, the Bitcoin market has recently experienced substantial volatility and staged a “roller coaster” market. Since the beginning of this year, the Bitcoin price has continuously set a new record for the highest currency value. It once hit a high of $64,854 on April 14th. Since May, the price of Bitcoin has dropped rapidly again, with the lowest price breaking through $30,000. As of press time, the price of Bitcoin has rebounded to $37,746.
In the face of the slump in the market and the strict statements from the regulatory authorities, the market’s judgments on the Bitcoin price trend have also been divided. Some investors in the currency circle still firmly believe that Bitcoin has a promising future, saying that it will buy the bottom in a timely manner; but others believe that the value of Bitcoin is relatively weak. In the future, with the entry of large funds from institutional investors, its price will be easily affected. Manipulation, which also causes its risk to continue to increase, and it is not advisable to follow up blindly.
Bank monitoring fails? Supervise and hunt “OTC” transactions
Last week, the three associations issued a notice requiring financial institutions and payment institutions not to provide services for cryptocurrency transactions in any form. Some people in the industry believe that although the content of the statement is still reiterating the previous regulatory requirements, the official announcement at the right time also shows the regulatory attitude, that is, the hope is that by cutting off the final liquidation link of cryptocurrency transactions, Prevent the occurrence of transactions.
However, only cutting off the connection between financial institutions and payment institutions and cryptocurrency will in fact have limited impact on cryptocurrency transactions. According to a number of banks and currency circles, the existence of the “OTC” business in the currency circle makes the fund monitoring role of banks and payment institutions in the cryptocurrency transaction chain virtually useless. A reporter from the Financial Association has learned that some local regulatory authorities have recently included “OTC” service providers in the scope of crackdowns.
The so-called “OTC” business refers to over-the-counter transactions, which can provide intermediary services for investors to buy and sell currencies. According to a currency investor, there are a large number of OTC service providers in some exchanges. Investors only need to “pend an order” on the exchange, and OTC merchants will provide them with corresponding cryptocurrency acquisition or sale services. Transactions can be completed in the form of C2C transfers with bank accounts and third-party payment accounts. After the OTC merchant confirms the receipt of the payment, the transaction can be confirmed in the exchange, and the OTC merchant earns a handling fee from it.
“Some transactions are disguised as ordinary transactions, and it is difficult for banks to detect.” A bank insider told the Cailian Press reporter that in bank accounts or third-party payment accounts, the “OTC” business may ultimately only reflect personal-to-person transfers. , Or personal transfers to a company, on the surface, it has nothing to do with cryptocurrency transactions such as Bitcoin.
According to reports, some trading accounts have been frozen by the bank before, mostly because they were involved in suspected money laundering and other crimes, not because the bank actually found the cryptocurrency transaction records of the relevant accounts.
However, the future of this “OTC business” in the currency circle also seems bleak. A reporter from the Financial Association learned from a number of Bitcoin “players” that there have been “OTC” business practitioners detained for the crime of “helping trust.” Prior to this, the People’s Court of Xihu District of Hangzhou City heard the case of Zhao Dong, the big man in the “OTC” business of the currency circle, and others in accordance with the law. According to public information, this case involved illegal settlement and reversal of at least RMB 3.1 billion of gambling black and gray products, and Zhao Dong received 70% of the “OTC” business related benefits.
Cutting off the upstream supply chain mining industry has been hit
Many cryptocurrency “players” believe that the most stringent aspect of China’s regulatory policies this time lies in the State Council’s Financial Committee’s statement on cracking down on Bitcoin mining and trading. Data show that China’s Bitcoin mining power accounts for 65% of the world. If China completely bans Bitcoin mining, it is equivalent to hitting the entire upstream supply chain of Bitcoin transactions. As soon as the news came out, the price of Bitcoin fell by more than $2,000 within 10 minutes and fell below the $40,000 mark.
At present, the governments of Inner Mongolia, Sichuan and other places have issued announcements claiming to clean up or restrict the mining industry within their jurisdiction. Among them, the local regulatory authority of Inner Mongolia announced on May 18 that the Autonomous Region’s Energy Consumption Dual Control Emergency Command Office has specially set up a cryptocurrency “mining” enterprise reporting platform to fully accept letters and visits regarding cryptocurrency “mining” corporate issues. According to media reports, the State Grid Sichuan Aba Prefecture Electric Power Co., Ltd. also issued a power outage notice, planning to implement temporary all-day power rationing on all big data users in the hydropower consumption demonstration area from May 16.
The above two actions have already had a significant impact on the entire currency circle. A person familiar with the matter revealed that at present, “mining” companies in Inner Mongolia have almost all stopped production.
“Although the current mining cost is rising, it is still a profitable industry relative to the price of Bitcoin.” A person in the currency industry said that the current cost of “mining” a Bitcoin is less than $10,000. The price of the currency is still above US$30,000. “If mining is banned in China, we can only consider migrating overseas.”
The suspension of mining also directly affected the sales and custody services of upstream mining machines. Recently, the customer service of Huobi Mall, a subsidiary of the cryptocurrency exchange Huobi.com, issued a notice stating that it has decided to suspend the provision of mining machines and derivative services for users in mainland China in order to comply with China’s latest industry regulatory policies. Users who have purchased BTC mining machine products (including “mining machine + custody”, “one-stop” and “worry-free mining”) will suspend the provision of mining machine custody services, and the machine will be removed from the shelves after a power outage on May 23.
Institutional investors enter the leek harvester under high leverage
It is not surprising in the currency circle to speculate coins with leverage. However, after the official statement this time, some trading platforms have suspended services such as leverage. Huobi said today that due to the large fluctuations in the market, in order to protect the interests of investors, services such as contracts, leverage, and ETP will not be opened for new users in some countries and regions.
In fact, in this year’s market, liquidators abound. Some Bitcoin “players” told the Cailian Press reporter that if the Bitcoin market fluctuates, it is reasonable to have time to replenish funds to prevent liquidation, but this year’s market is indeed that the account is very likely to be liquidated in an instant. There is no The time to cover the position.
“The value of Bitcoin has risen and fallen sharply. In addition to the policies of various countries, the more important factor is the entry of institutional investors.” Xia Ping, a member of the Blockchain Committee of the China Computer Society, told the Cailian News reporter. There is no unified quotation mechanism and accounting standards, which makes Bitcoin and other cryptocurrencies extremely easy to be manipulated by big capital, and the only purpose is to make excess profits.
Since the beginning of this year, institutional investors including international technology giants such as Tesla and international investment banks such as Goldman Sachs have expressed high-profile stances that they are bullish on cryptocurrencies such as Bitcoin. But the real transaction is even more tragic, whether it is long or short, it is possible to be instantly blown up by big funds.
Some people from cryptocurrency exchanges bluntly said that the structure of cryptocurrency trading has undergone a radical change from before. 8% of institutional investors accounted for 90% of the transaction volume. Despite the large number of retail investors, the transaction volume accounted for a smaller and smaller proportion. Institutional investors can use hundreds of times leverage when confronting longs and shorts, which is much higher than that of retail investors.
“Institutional investors can raise a lot of funds through fundraising and other forms, coupled with hundreds of times of leverage, it is extremely easy to manipulate the price of Bitcoin. In this process, institutional investors earn excess profits, but for most As far as retail investors are concerned, it is a process of repeatedly being’cut leeks.'” Xia Ping said.
Regarding the entry of institutional investors, market views are also polarized. Some currency investors believe that the entry of institutional investors is a good thing in the long run, because the entry of more institutional investors will mean that the breadth and depth of bitcoin transactions will be expanded. But there are also some people who believe that Bitcoin is a bubble from beginning to end, supporting regulation and banning related transactions.
Global central banks verbally warn that Bitcoin is doomsday?
In addition to China’s regulatory authorities, central banks and finance ministries in other countries around the world have also shown a consistent and cautious attitude towards Bitcoin. Insiders bluntly said that Tesla founder Musk’s “contradictory” remarks led to a sharp rise and fall in the bitcoin market, which is one of the important factors for central banks to pay attention to the risks of bitcoin transactions again.
Following China, the European Central Bank Deputy Governor Gindos once stated on May 19 that due to the difficulty of identifying the potential value of cryptocurrency assets, cryptocurrency assets should not be regarded as real investments. “The fundamentals of crypto assets are very weak. When it is difficult to find the true basis of an investment, then this is not a real investment, and investors should be prepared for large price fluctuations.” His British partner Bailey also Reiterate the argument that “investors are destined to lose money”.
Subsequently, the Norges Bank and the Bank of Canada both emphasized the risks to the stability of cryptocurrencies. A recent document submitted by the Bank of Korea (BOK) to lawmakers shows that the bank is seeking the power to monitor cryptocurrency transactions through users’ real-name bank accounts. Even in India, where the cryptocurrency market is booming, the country’s central bank has recently informally urged banks to cut ties with cryptocurrency exchanges and traders.
Faced with the hunting by regulators in many countries, will Bitcoin eventually come to an end? Xia Ping pointed out that Bitcoin has become a global speculative tool, and its trading will continue to exist, and the price fluctuations in the future will continue. Especially as countries strengthen their risk warnings, it is even more difficult for retail investors to make money from them.
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.