
Bitcoin Falls 20% on PBOC Rumors, Chinese Exchanges Reinstate Fees - CrunchyJams
http://thegenesisblock.com/bitcoin-falls-20-pboc-rumors-chinese-exchanges-reinstate-fees/
======
tokenadult
The last time I posted a news story about a Bitcoin sell-off, most
participants here didn't believe me, because the sell-off wasn't apparent in
the ticker they follow.[1] Now I keep a closer eye on that ticker, to see how
much lag there is in trading after market-changing news is announced. Bitcoin
is still very volatile, and it's not clear who can succeed in timing the
market. "Markets can remain irrational a lot longer than you and I can remain
solvent"[2] is still good investment advice.

[1] [http://bitcointicker.co/](http://bitcointicker.co/)

[2]
[https://en.wikiquote.org/wiki/John_Maynard_Keynes#Attributed](https://en.wikiquote.org/wiki/John_Maynard_Keynes#Attributed)

~~~
rsynnott
The other possible issue there is that Magic the Gathering Online Exchange
tends to behave weirdly differently to all other exchanges.

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btbuildem
I've read a pretty lucid (for a change) analysis of this over at
/r/bitcoinmarkets

The gist of it was that BTCChina's long game was to kill all competition (by
being first, and zero fees), wait for the surge of new users to taper off
(market saturation?), and start charging a fee once they've monopolized the
market.

The OP further speculated that they must've interpreted the change of
regulatory climate as disastrous, expect a major exodus, and have implemented
trading fees to get at least some profit off the activity.

~~~
TacticalCoder
Interesting... In a correctly working market wouldn't the end result be that
competitors prefer to lower their fees too and then offer other guarantees
(security, etc.) in order to keep clients and to bring in new clients?

Or is the bitcoin exchange market a "winner takes all" market?

And if they "win" and start charging a fee, wouldn't it immediately open a new
opportunity for someone to come up with a platform with lower fees?

(honestly asking... Btw I'm european and I'm on Bitstamp for trading Bitcoins)

~~~
kolinko
Just like auction houses - it's a winner takes all. The biggest exchange has
the hughest volume and lowest spread.

As for competitors lowering their fees - one can onlly do it as long as it has
funding to do so.

Here you can witness a perfect example of a free market economy leading to a
suboptimal situation. And an example of usefullness of antitrust laws.

------
_fs
"Bitcoin falls 20% in a day...." In other words, business as usual.

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deepinsand
I assume you'll see other countries' follow China's lead. There's no reason
for a government not to.

I fear this might be dire to the Bitcoin economy. Skirting wealth flight laws
WAS Bitcoin's killer feature. All of the other Bitcoin use cases I know of are
incremental in nature (ie, 2.5% savings on e-commerce transactions).

The open question is if enough of a hype-market was built to keep the other
use cases alive. In the case of e-commerce, I assume a rational merchant only
accepted Bitcoin because of 1) viral marketing channel 2) speculative
hoarding.

The speculation MIGHT work out if the underlying Bitcoin economy was powered
by the transaction volume and value of international wealth movement. Running
forward it'll be from e-commerce and store of wealth, and I'm skeptical if
that'll be enough.

~~~
oijaf888
What wealth flight laws do countries with freely tradable currencies have?
AFAIK I could move a million dollars from my bank account to a bank account in
England with no issues.

~~~
deepinsand
Perhaps, but I don't think the US has worries about wealth flight. I assume
the countries that dominate this "economy" are Argentina, Cyprus, etc.

~~~
bmelton
The US does have an expatriation tax[1] that is of concern for many. There was
also a dramatic increase to the tax proposed as a result of Eduardo Saverin's
expatriation before the Facebook IPO. Even though he hadn't been living or
working in the US for some time prior, the US imposes taxes on all moneys a
citizen earns, regardless of where they are living, or where that money was
earned.

Beyond that, expatriation from the US is at an all-time high[3], and the rumor
is that it's related to the adoption of Obama's progressive taxation schema.

[1] -
[http://en.wikipedia.org/wiki/Expatriation_tax#United_States](http://en.wikipedia.org/wiki/Expatriation_tax#United_States)

[2] - [http://en.wikipedia.org/wiki/Ex-
PATRIOT_Act](http://en.wikipedia.org/wiki/Ex-PATRIOT_Act)

[3] - [http://www.thefiscaltimes.com/Articles/2013/11/18/US-
Taxpaye...](http://www.thefiscaltimes.com/Articles/2013/11/18/US-Taxpayers-
Are-Expatriating-Record-Rate)

~~~
ewoodrich
Wait, which "progressive taxation schema" is this? The expiration of the top
1% of the Bush tax cuts?

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bmelton
That, the "Buffet Rule", the reduction on charitable donations, the increase
on capital gains, and his proposed "Grand Bargain", which lowers rates, but
eliminates enough loopholes that it is at least expected to raise the
effective tax rate for corporations.

~~~
ewoodrich
Fair enough, but the "Buffet Rule" hasn't happened, and almost certainly won't
during his term.

~~~
bmelton
As I don't net more than $1 million a year, I hadn't followed it very closely,
but I admit that I'm a little surprised. For some reason I thought it had
_most certainly_ passed and been enacted.

Thanks for the correction.

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DigitalJack
Sometimes a precipitous event happens and we can say that event was for
certain the cause of something going up or down on price.

Most of the time I think there are just too many variables to so confidently
point to one as the cause.

So when I hear on the radio that the Dow went down because of xyz I just
chuckle. If we were really so good at pinpointing cause and effect in the
markets, the people doing so would shut up and make money.

~~~
dopamean
While I generally agree with what you've said here I don't think it applies as
much to bitcoin. The DJIA is huge and there are many, many, many factors that
can affect it's movement. Bitcoin is tiny in comparison with a very illiquid
(is that a word?) market. I think many people had attributed the huge runup in
price to activity in China so it is no surprise that bad news in China would
have this effect.

Basically I think it is reasonable to assume that this news is the reason for
the decline.

~~~
yen223
"Bitcoin is tiny in comparison with a very illiquid (is that a word?) market.
"

The idea of Bitcoin being illiquid strikes me as being quite ironic.

~~~
avn2109
Liquidity != Volatility. There are many cases when it's hard to turn BTC into
$US/Danish Pastries/Gold Bars; this makes it illiquid. Try getting your money
out of MT Gox.

~~~
yen223
The irony is that Bitcoin is supposed to be a replacement for cash.
Technically, it should be the most liquid thing out there.

~~~
dopamean
I got what you're saying and I totally agree. I think the problems with
liquidity contribute heavily to the volatility as well.

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drcode
The confusing thing to me is why the price of a bitcoin went DOWN on btcChina
(compared to other exchanges) MtGox, which has had a long history of problems
with bank transfers, actually carries a btc price premium (because fiat
currency on MtGox isn't very liquid, you have to pay more fiat to buy a
bitcoin there) so this whole situation is just confusing.

I think the most likely reason why BTCChina prices have reached parity with
other exchanges is simply that the recent selloff has actually temporarily
improved RMB liquidity in BTCChina accounts, since folks are stashing RMBs in
their BTCChina accounts as they wait to jump back into the market.

...so despite the new Chinese government rules that should lower RMB
liquidity, the markets seem to say that BTCChina RMB liquidity is actually
pretty good for the time being.

~~~
pmorici
Because the report about the Chinese exchanges being cut off appears to have
been complete BS. There never was any problem but the false news caused a
panic sell by people who didn't bother to think it through logically.

~~~
drcode
Not complete bs- Some limitations on third party payment services are real,
though perhaps only minor inconveniences.

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snake_plissken
Can someone confirm or better explain how Mt Gox's relatively longer amount of
time to process USD withdrawal requests is causing there to be a premium over
other exchanges quoted USD/BTC?

This is how I understand it: people already have dollar denominated accounts
with Mt Gox, either by selling BTC on Mt Gox or depositing money there. They
want to get these dollars out, but since it takes so long for Mt Gox to
process these transactions and complete the requests, people are buying BTC on
Mt Gox and transferring them to other exchanges that can process the
withdrawals in a quicker fashion. This is in exchange for a discount on the
USD/BTC rate they will get, i.e. they will lose the premium offered by Mt Gox
so that a dollar denominated withdrawal request will happen more quickly on
another exchange. The net result is a higher demand for Mt Gox BTC offers, and
the premium results.

~~~
andrewla
The answer is simpler than that. The issue has nothing to do with Bitcoins.

This is an issue with USD (as dollar bills in your pocket or in a bank
account) and MTGXUSD (as dollar units in a Mt Gox account). MTGXUSD are worth
less than USD because of two factors; one is potential regulatory issues, and
the other is that you are buying future dollars, which are cheaper than right
now dollars.

Because MTGXUSD are cheaper than USD, you need more of them to buy BTC, and
thus the price differential.

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kolev
It amuses me when people say: "This isn't actually bad news." and, yet,
Bitcoin drops 20-30-40% in just hours. Imagine what _really_ bads news can do
to it then! I secretly hope all investors and especially the amateurs who are
professional only at panicking to leave the market so that we can focus on
Bitcoin as a payment technology and not an investment tool. Let's be honest -
most people are greedy. Most of us, too. Let's not mix greed with technology
evangelism! Many will lose their hard-earned reputation by making baseless
statements that Bitcoin will be tens of thousands soon while secretly hoping
that somehow their small message will reach the wide audience and everybody
will start buying!

~~~
smacktoward
To a true believer, nothing is ever bad news.

~~~
kolev
Well, of course, there are pathological cases as well. :)

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foobarqux
All the people who believed BTC was immune to government intervention are
getting hit by a dose of reality.

~~~
fit2rule
People forget that for as long as we have more than one government in the
world, they will be met at the feeding table in equal order, which is to say
that we must never forget that the very mechanism by which we consider
ourselves customers, consumers, individuals being serviced: so too are
governments allowed this right.

And corporations now, as well.

So, if we are to look at this situation honestly the only real conclusion to
be made is that this is an act of legitimization on the part of the Chinese
law-makers, and we can all just stop pretending that .btc are not here to
stay, and be used, and .. compete on the global money markets.

What I really can only say, in the rush of it all, is that I hope we can
finally end the hegemony of the Petro-dollar, and all those invested in its
persistence .. for it has been a very vile instrument, and the time has come.
Crypto-currency has the stage.

~~~
rtpg
there's the little detail that the government of the country you live in does
get a bit more preference, if only by the fact that they can come to your
house with guns.

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Tycho
If you were determined to make Bitcoin crash, how would you set about it?

~~~
leokun
Buy a huge percentage of existing bitcoins and then sell each bitcoin for
cheaper than you bought it for and cheaper than your previous sale. Given the
entire currency is worth in the billions, nobody would do this, and there's
nothing to gain from doing it.

~~~
Tycho
You could also try to spook investors though, and make the confidence
evaporate, possibly without having to spend much yourself.

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pepijndevos
I've wondered... if the price of a BTC differs from one currency/exchange to
the next, what stops you from buying at the cheap and selling at the expensive
one?

~~~
zch
It's called arbitrage. It's possible with bitcoin, but not easy and by no
means quick.

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quaffapint
It was pretty much guaranteed to fall since I just bought some right before
that. Next time I plan on buying any, I'll let you know, so you can plan
accordingly.

~~~
abarringer
That's how my investments tend to go too.

To paraphrase a once great govenator.

The key to success is to buy when I sell, Sell when I buy, work hard and marry
a Kennedy.

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pmorici
It's my understanding that this was all the result of someone who managed to
post a fake message on the Chinese equivalent of Twitter. The problem with all
the news out of China about Bitcoin is that it isn't in English so unless you
speak the language it is hard to evaluate it's truthiness and instead are
forced to rely on second hand sources.

[http://www.btc38.com/btc/btc_market/476.html](http://www.btc38.com/btc/btc_market/476.html)

~~~
zhuzhuor
(I speak Chinese.) The "rumor" seems already be verified by newspaper and
media.

See the article [1] on the website of Xinhuanet [2].

[1]
[http://news.xinhuanet.com/fortune/2013-12/17/c_125874796.htm](http://news.xinhuanet.com/fortune/2013-12/17/c_125874796.htm)

[2]
[http://en.wikipedia.org/wiki/Xinhua_News_Agency](http://en.wikipedia.org/wiki/Xinhua_News_Agency)

