50% down in 3 days

12/07/2013 11:32:00 am Unknown 0 Comments

China tries to protect itself from big scary BITCOIN!!!

So, China have decided to ban all banks from using Bitcoin and from displaying prices in Bitcoin. This is the driving force behind the current dip in the price of Bitcoin and we have yet another thing to be thankful to the Chinese for.

The news broke 2 days ago to very little fanfare and really reached the mainstream yesterday evening. The important things to look at are, what does it do to the fundamentals of Bitcoin, and also we've got to try to predict why Chinese government are banning banks from using this exciting new cutting edge technology.

Control

This is all about control of the economy, China has seen amazing growth over the past decade and this needs to be tapered. It's generally internationally accepted that Keynes was right and Hayek was wrong, and that economies need to be stabalised by government, China are only following suit. However with a not so secretly bankrupt U.S.A and a Eurozone which is also in quiet crisis perhaps were we too quick to hail a winner?

Fiat VS Crypto

We've always held the view that this was not an all in type question, and that Crypto would only serve to stabilise Fiat by giving it a new standard to adhere too, unfortunately it's taking too long to become a widely accepted form of currency and in the mean time it's trying to hard to be a tool for speculation alone. What we mean by this is that people are using a truly scarce currency to try to exchange for a pseudo-scarce currency (there's an oxymoron for you!) whereas if more places just accepted the use of Bitcoin (or rather WHEN) then fiat would become a tool for credit mostly.

What happens next?

Well with china imposing sanctions on itself they have only done half a job and in doing so have played perfectly into Bitcoin's hands. So now instead of being able to trade Bitcoin for Yuan, Chinese people will have to use their Bitcoin for goods and services directly. It does beg the question, who gets left holding the baby, meaning that sooner or later someone in the currency cycle will want to buy fiat......That's only a problem if you live in china, other countries have yet to implement sanctions so Yuan will start leaking out of china on a mass scale as foreign companies collect export money in Bitcoin that Chinese citizens have paid for with Yuan. we can see the American and E.U banking giants rubbing their grubby little mitts together.

That's one scenario, another is that the sanctions keep the Yuan stable while the dollar inevitably hits a real hard patch along with the Euro and the Chinese find themselves with strongest economy in the world by far. Of course for this to happen, Europe and America would have to sit by patiently without hiking up import taxes on Chinese goods.....is there much chance of that, and also as China save themselves and everyone else becomes broke, who will they sell their solar panels to?

So, wait till Bitcoin gets down to around the $400 mark and then Buy, the next rise will be just a bit slower than the last one, but we're still heading for $2000 by the summer, of course that's barring anymore negatives, a similar move in the U.S would really slow down the rise, but we don't think America can get away with such a move. Banks worry that Bitcoin may make them obsolete, but we all know there will always be a place in this world for imaginary money.

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