The risk associated with taking a position in bitcoin has long been highlighted as one of the primary factors early adopter must consider. On a number of occasions over the past five years, bitcoin holders have had to weather pretty large scale depreciations and, alongside these corrections, have had to make the decision to stay firm and not sell into the decline. This is as true now as it has ever been yet the people who were clinging onto their coins just a couple of weeks ago now the same people that are driving the depreciation.
What’s happening in China isn’t great for going near term – that’s for sure. The wave of selling we are seeing now is coming on the back of Chinese individuals dumping their bitcoin positions in expectations of having difficulty selling bitcoin after September 300, which is now confirmed as the date that bitcoin exchanges will close in the nation.
Any sort of large-scale selling, and especially some to the degree associated with Chinese volume, is going to translate to a price hit. After the Chinese market has removed its stake, however, things should quickly return to normal – should do so – dramatically reduced volatility risk.
Anyone who has been in the space for a while will know that at least once a year we see the Chinese, make an announcement that results in a quick and severe hit for the bitcoin price. It’s nothing new and, in years gone by, we have suggested that it will keep happening.
With the action that the Chinese government has taken, it won’t be able to happen again. With no exchanges operating in China and – by proxy – a dramatically reduced volume held by Chinese residents (i.e., those affected by any Chinese government decisions), any input from Chinese policymakers will be nothing but a drop in the water for the bitcoin ecosphere as a whole.
The sooner that this situation arises, the sooner everything can get back to normal and the sooner bitcoin can resume its long-term upside trend.
We are not saying that price has reached a bottom, but we are saying that – right now – things aren’t as bad as they initially seem.
Image courtesy of Thomas Depenbusch via Flickr