China continues to apply controls on bitcoin activity, forcing the price of the digital currency to fall even further, trading below $ 890 at the time of writing. The People’s Bank of China (PBOC) said its investigation should examine whether the exchanges were violating the rules of “market manipulation, money laundering and unauthorized financing” nothing more and nothing less.
Concerns about excessive enforcement or regulatory oversight could have an impact on volumes, creating a bearish outlook for the USD-BTC in the near term.
However, the inferior movement exhibited by bitcoin could represent a long-term buying opportunity. The Chinese central bank can only be “anxious” to learn more about the bitcoin ecosystem and aim to implement some sensible regulations. In this case, the latest development is just the beginning of the road to a more robust and credible market, followed by broader adoption and greater stability.
But as the Chinese central bank is struggling against the exchange market on multiple fronts, it cannot maintain the balance for a long time, however the options on the table are not to assume concerns, but to learn wisely how the price of the Digital currency in certain situations.
Restricting bitcoin and other forms of capital outflows in China may further exacerbate the problem of capital flight. On the contrary, China must allow a floating exchange rate to encourage investment and halt capital outflows. A short-term loss in capital outflows will be offset by long-term investment flows in productive enterprises, driven by the price signal, without distortion when the exchange rate floats freely.