Cryptocurrencies

Crypto East vs West

 

Apologies for the slightly clickbaity heading: I’m playing on the topic of the US China Trade War.

While the Trade War doesn’t directly influence crypto, it surely plays a roll. I believe that as inevitable market crunches loom nearer, so crypto will become ever more attractive as an investment asset – specifically as a high ROI store-of-value. We all know that crypto isn’t as stable as gold, but gold can’t offer the returns that crypto does. Obviously that is bullish for crypto in the long-run.

But that’s not what I wanted to tell you today; today I want to draw your attention to something which I just became aware of: the silent return of China to crypto.

Those who have been in crypto for two years or more will probably remember the last round of “China FUD” in the latter half of 2017. Many rumours circulated, including that Bitcoin was “banned” in China. This was not true. While it is true that China did clamp down on crypto in order to better control the flow of money, this only resulted in changes to things such as BTC mining and to the operation of exchanges on Chinese soil. Chinese residents can and still do hold and purchase Bitcoin, quite a lot of it in fact…

2018 was a bad year for crypto: from start to finish it was pretty much a bloodbath. Bitcoin haemorrhaged value and the altcoins were even worse off (most of them). But right at the end of 2018, the market bottomed out and slowly crypto started to climb back to where we are today.

December 2018 / January 2019 was a tense time. The word “capitulation” was on everybody’s lips – rather silly when you consider how far Bitcoin had already fallen (well over 80% of its value had been lost). While I was against it, even I could not rule out the prospect of a possible further capitulation. Perhaps, in retrospect, those expecting a further capitulation event were right to do so, but they hadn’t counted on China re-entering the arena.

It turns out that American (the dominant buyers of crypto) attitudes towards crypto hadn’t really changed by December 2018. The prevailing Western sentiment towards crypto was still negative, and may even still be so today. I have recently (including yesterday) spoken about the unhealthy fear that most Americans (and some others too) have of their governments with regard to cryptocurrency regulations. Many investors are afraid to challenge crypto-unfriendly regulations (they needn’t be – read this: The Future of Privacy Coins). What I am saying is that Eurocentric money didn’t pour back into crypto. It didn’t stop a possible extra capitulation and it didn’t underpin the rise of crypto prices in 2019. Chinese money did.

In case you missed it, I strongly suggest that you read this CCN article which was published yesterday: “Tether and Search Engine Data Reveals China Fueling Bitcoin Rally”. While search engine data is interesting, it doesn’t necessarily correlate to trading action. But Tether data does.

It turns out that while the US dominated Tether transactions in late 2017, that dropped away rapidly in 2018 – while at the same time Chinese Tether transactions sky-rocketed. Now in 2019, Chinese Tether transaction dominate the market – by FAR! Take a look at this excerpt from the CCN article:


From https://www.ccn.com/china-fueling-bitcoin-rally-search-engine-tether-data/

 

It’s not quite as simple as it looks on that chart: there is a difference between Tether traded on exchanges and Tether moved to and from exchanges. But even allowing for a large margin of error, you can clearly see how the US has dropped from 39% to about 3% within a year and a half, within the same time period that China rose from 12% to 62%. As the title of the graph suggests, those figures are for Tether received by exchanges. I have a little more reading for you to do, I also highly recommend that you read the source document that CCN got this data from. If you do read that report, ensure that you take note of the fact that China is on track to exceed its 2018 Tether transactions by a large margin in 2019.

Analysis

I consider this to be a very positive sign for crypto in 2019. I have been sitting on the fence a little with regards to the return of the bull market, but this confirms it for me. Take note:

Bit Brain now confirms that the next crypto bull market has officially begun. 

This is not just a blip on the charts or a bullish period in a sideways market, it is the beginning of a bull market – probably a very big one.

The timing couldn’t be better. The US has just received the bad news that Binance will be ceasing US crypto trading in September of this year (check the latest BNB price action). I pity those who sold BNB on this news, that was a premature reaction and a mistake. Remember: Binance is of Chinese origin and has the support of the international crypto community, not just the US. With US crypto trading still at relatively low levels and with Chinese crypto trading rising swiftly, the withdrawal of US money from Binance should make little difference to the market.

Furthermore: Binance has announced that it will launch a US specific Binance platform, in addition to many other regional platforms. I assume that these will be a watered-down version of Binance.com. This is obviously an attempt to remain within the regulations of crypto-hostile countries like the US and still to offer centralised exchange options to customers who may want them. Ultimately Binance DEX is probably going to be the best Binance platform for anyone to use, but DEXs are still in their infancy and not everyone is ready for that level of decentralisation and personal responsibility, at least not yet. So while there may be a few short-term dips, crypto will go on and will grow ever stronger. In the words of Binance CEO CZ:

“Some short term pains may be necessary for long term gains. And we always work hard to turn every short term pain into a long term gain.”

Reminder:

I know that many crypto enthusiasts may be too new to the market to remember the pre-China FUD days. I also know that more experienced crypto enthusiasts tend to forget the past, so let me refresh a few memories and enlighten a few of the new guys and gals:

China is crypto crazy!

The Chinese love crypto, they are mad about it, even if their government regulates it more than most governments do. Once Chinese money starts pouring in, all bets are off with regard to just how high the next bull run may climb. China also has a very large and rapidly growing economy (why do you think there is now a trade war?). Remember to take that into account when investing for the future.

Oh, one last thing: NEO is the biggest name in Chinese crypto. Developed with Chinese government regulations in mind. And you ask me why I prefer NEO to the likes of EOS or Cardano…

Off you go, I’m sure you have some research to do.

 

Yours in crypto

Bit Brain

“The secret to success: find out where people are going and get there first” 

~ Mark Twain

“Crypto does not require institutional investment to succeed; institutions require crypto investments to remain successful” 

~ Bit Brain

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