BTC/USD Gaining Momentum as China’s Bitcoin Ban Seen Backfiring

Bitcoin (BTC/USD) prices are grinding higher this week on renewed optimism that the blockchain will overcome China’s latest regulatory crackdown.

Prices continued to trade comfortably north of $3,900 at the start of Tuesday trading. Prices shot up nearly 7% on Tuesday, according to Bitstamp. The BTC/USD was last seen trading at $3,909.00, where it was little changed from its previous close.

At present values, bitcoin is capitalized at roughly $65 billion, according to CoinMarketCap. That’s more than double the next leading blockchain currency Ethereum.

S&P’s China Downgrade Highlights Limits of Bitcoin Ban

Last week, Standard & Poor’s downgraded China’s sovereign credit rating in an apparent rebuke of Beijing’s recent regulatory fight to curb systemic risks. S&P triggered the downgrade after concluding that Beijing’s “de-risking” efforts aren’t moving fast enough to cool credit growth.

S&P analysts continue to see corporate-sector credit at 9%, which is higher than the desired ratio. The U.S.-based credit rating agency says China’s deleveraging efforts are likely to be “much more gradual than we thought could have been the case early this year.”

The downgrade occurred mere weeks after Beijing began its regulatory assault on cryptocurrency. Although we’re not suggesting that the downgrade was because of those actions, banning bitcoin clearly hasn’t been enough to improve China’s image in the eyes of regulators.

The global crypto market has expanded rapidly over the past nine months, but is only a drop in the bucket from China’s perspective. The market for bitcoin and even ICOs simply isn’t big enough to be a real threat to the world’s No. 2 economy.

However, that may soon change. There may come a time when the cryptocurrency market is simply too valuable to pass up. This is likely to occur when cryptos have the potential to replace many of the yuan’s everyday functions. This may lead regulators to a different conclusion.

There’s already evidence of Chinese investors moving to market-friendly Japan, which recently recognized bitcoin as a legitimate form of payment. The Chinese shuffle will also lead mainland investors to South Korea, another regional player developing a favorable outlook on cryptos.

Still, the loss of China is an immediate blow to the bitcoin community. Prior to the nationwide ban on Chinese exchanges, the mainland market accounted for 10-13% of global bitcoin trades. Replacing those order books won’t be easy in the short term.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi