Bitcoins have just suffered another huge hit. The other shoe has just fallen.
Bitcoins were selling at $1,242 on November 29. The headlines were all over the Web: “Bitcoins surpass the price of gold.” That was the peak. They are around $500 today. That is a decline of 60%.
When an investment fad ends, it usually ends spectacularly. A 60% decline in less than three weeks indicates that the Bitcoins fad is over.
What is significant is why the collapse occurred. We know exactly why. China’s government took two steps.
First, on December 5, the People’s Bank of China announced that Bitcoins posed an unacceptable risk. It banned financial institutions from using Bitcoins. The price of Bitcoins fell by 30%.
Second, on December 18, the Bank forbade any third-party exchange of yuan (renminbi) for Bitcoins. Immediately, BTC, China’s largest Bitcoins exchange, ceased taking any new yuan deposits. That announcement has collapsed the market in China. It has collapsed the market worldwide.
When you get into a market, you need an exit plan. All of a sudden, there is no exit plan in China.
Around the world, the currency-denominated price of Bitcoins is down. That is how much clout the Chinese government has in this market.
(For the rest of my article, click the link.)