Bitcoin is Under Full Siege! How far can bitcoin go after the big entry of foreign institutional investors?

Some local regulators have recently brought “OTC” business providers into the fold.

Bitcoin is Under Full Siege! How far can bitcoin go after the big entry of foreign institutional investors?

An unprecedented roundup of bitcoin trading has begun. The Caixin reporter was told that the cryptocurrency industry is being overhauled in several ways. The “OTC business” that bypasses the bank monitoring system, the mining industry that speculates on the upstream supply chain of coins, and exchanges have all been subject to different restrictions. Some exchanges and mining farms have started to consider the possibility of going offshore.

At the same time, the bitcoin market has recently experienced significant volatility and a “roller coaster” ride. This year, the price of bitcoin has continued to set new records for the highest coin value, once hitting a high of $64,854 on April 14, and has fallen rapidly since May, when it broke through $30,000. As of press time, the price of bitcoin rebounded to $37,746.

In the face of the plunge in the market and the harsh statements from regulators, the market’s judgment on bitcoin price trends has also diverged. Some cryptocurrency investors still firmly believe that the future of bitcoin is promising and say they will take the bottom in due course; however, others believe that the value of bitcoin is relatively weak and that its price will be easily manipulated in the future with the entry of institutional investors’ big money, which will also lead to its continued increase in risk and should not be followed blindly.

Bank Monitoring Failure? Regulation rounds up “OTC” trading
Last week, three associations issued a notice requiring financial institutions and payment institutions not to provide services for cryptocurrency transactions in any form. Some industry insiders believe that although the content of the statement still reiterates the previous regulatory requirements, the timely official announcement also indicates the regulatory attitude, which hopes to eliminate the transactions by cutting off the final clearing link for cryptocurrency transactions.

However, merely cutting off financial institutions and payment institutions from cryptocurrencies will in fact have a limited impact on cryptocurrency transactions. According to many banks and cryptocurrency industry sources, the existence of “OTC” business in the cryptocurrency industry makes the role of banks and payment institutions in monitoring funds in the cryptocurrency transaction chain virtually useless. The Caixin reporter learned that some local regulators have recently included “OTC” business providers in the scope of crackdown.

The so-called “OTC” business, that is, over-the-counter trading, can provide intermediary services for investors to buy and sell coins. A cryptocurrency investor introduced that there are a large number of OTC service providers in some exchanges. Investors only need to “list” on the exchange, and then there will be OTC merchants to provide the corresponding cryptocurrency acquisition or sale services, and the transaction can be completed in the form of bank account or third-party payment account in accordance with C2C transfer. After the OTC merchant confirms receipt of the payment, the transaction is confirmed on the exchange, and the OTC merchant earns a commission.

“Some transactions are disguised as ordinary transactions, which is difficult for banks to detect.” A bank insider told Caixin that in a bank account or a third-party payment account, the “OTC” business may end up as a person-to-person transfer or a person-to-company transfer, which on the surface seems to have nothing to do with cryptocurrency transactions such as bitcoin.

According to the report, some trading accounts have been frozen by banks in the past, mostly due to their involvement in suspected money laundering and other criminal acts, not because the banks actually found the cryptocurrency transaction records of the relevant accounts.

However, the future of this kind of cryptocurrency “OTC business” also seems to be bleak. The Caixin reporter learned from a number of bitcoin “players” that some “OTC” business practitioners have been detained for “helping to commit a crime of trust. Previously, the Hangzhou West Lake District People’s Court heard the case of cryptocurrency “OTC” business mogul Zhao Dong and others in accordance with the law. According to public information, the case involved illegal settlement and backflow of at least 3.1 billion RMB to the gambling black and grey industry, from which Zhao Dong received 70% of the profit share related to the “OTC” business.

Cutting off the upstream supply chain and hitting the mining industry
Many cryptocurrency “players” believe that the toughest aspect of China’s regulatory policy is the State Council’s Financial Commission’s stance on cracking down on bitcoin mining and trading practices. Data shows that China accounts for 65% of the world’s bitcoin mining capacity. If China completely bans bitcoin mining, it would amount to a crackdown on the entire upstream supply chain of bitcoin trading. As soon as the news broke, the price of bitcoin dropped over $2,000 within 10 minutes, falling below the $40,000 mark.

Already, the governments of Inner Mongolia and Sichuan have issued announcements to clean up or restrict the mining industry under their jurisdictions. Among them, the local regulator of Inner Mongolia issued an announcement on May 18, saying that the Office of the Regional Energy Consumption Double Control Emergency Command had set up a reporting platform for cryptocurrency “mining” enterprises to fully accept letters and visits about cryptocurrency “mining” enterprises. According to another media report, State Grid Sichuan Aba Power Co., Ltd. also issued a power outage notice, which plans to implement temporary all-day power restrictions for all big data users in the hydropower consumption demonstration area from May 16.

The two actions mentioned above have already had a significant impact on the entire coin circle. A source close to the situation revealed that the “mining” enterprises in Inner Mongolia are almost in a state of complete shutdown.

“Although the current cost of mining is rising, it is still a profitable industry in relation to the price of bitcoin.” A cryptocurrency industry insider said that the current cost of “mining” a bitcoin is less than $10,000, while the current price of bitcoin is still more than $30,000. “If mining is banned at home, you can only consider moving overseas.”

The suspension of mining has also directly impacted upstream mining machine sales and hosting services. Recently, the cryptocurrency exchange’s FireCoin Mall customer service issued a notice saying that it had decided to suspend the provision of mining machines and derivative services for users in mainland China in line with China’s latest industry regulatory policies. For users who have purchased BTC mining products (including “mining machine + hosting”, “one-stop” and “worry-free mining”), the hosting service of mining machines will be suspended and the machines will be taken offline from May 23. Power outages and downgrades.

Institutional investors enter the leek harvesting machine under high leverage
It is not surprising that speculation in coins is leveraged in the cryptocurrency circle. However, after this succession of official statements, some trading platforms have suspended leverage and other services. said today that because of the high volatility of the market, in order to protect the interests of investors, services such as contracts, leverage and ETP are temporarily not opened for new users in some countries and regions.

In fact, in this year’s market, there are many people who have lost their positions. A bitcoin “player” told the Caixin News Agency that, by definition, if the bitcoin market fluctuates, there is time to replenish the funds to prevent a blowout, but this year’s market is really the account is very likely to blow up instantly, there is no time to replenish the position.

“The big rise and fall in the value of the bitcoin currency, in addition to the policies of various countries, a more important factor is the entry of institutional investors.” Xia Ping, a member of the Blockchain Special Committee of the Chinese Computer Society, told Caixin that because Bitcoin does not have a unified quotation mechanism and accounting standards, this has led to cryptocurrencies such as Bitcoin being extremely vulnerable to manipulation by big capital, with the sole purpose of earning excessive profits.

This year, institutional investors, including international tech giants like Tesla and international investment banks like Goldman Sachs, have made high-profile statements that they are long bitcoin and other cryptocurrencies. However, the real deal is even more disastrous, as either going long or short can be instantly pulled out of position by big money.

Some cryptocurrency exchange sources say that the structure of cryptocurrency trading has changed drastically from the previous one. 8% of institutional investors account for 90% of the trading volume, while retail investors, despite their large number, account for a smaller and smaller share of the trading volume. And institutional investors can use hundreds of times more leverage in long-short dueling, which is much higher than retail leverage.

“Institutional investors can raise large amounts of money, such as through fundraising, and with hundreds of times the leverage, it is extremely easy to manipulate the price of bitcoin. In the process, institutional investors earn excessive profits, but for most retail investors, it’s a process of repeatedly being ‘chipped’.” Xia Ping said.

The market’s views on the entry of institutional investors are also polarized. Some cryptocurrency investors believe that the entry of institutional investors is a good thing in the long run, as the entry of more institutional investors will mean that the breadth and depth of bitcoin trading will be expanded. But there are also those who believe that Bitcoin is a bubble from start to finish and support regulation to outlaw the trading.

Global Central Banks Verbal Warning Bitcoin’s End Is Near?
In addition to Chinese regulators, central banks and finance ministries in other countries around the world have shown a consistent cautious attitude toward bitcoin. Some industry insiders are saying that Tesla founder Musk’s “backtracking” comments have caused the bitcoin market to plummet, which is one of the key factors why central banks are once again concerned about the risks of bitcoin trading.

Following China, European Central Bank Vice President Kim Doss claimed on May 19 that cryptocurrency assets should not be considered a real investment due to the difficulty of identifying their potential value. “The fundamentals of crypto assets are very weak and when it is difficult to identify the true basis of an investment then it is not a real investment and investors should be prepared for significant price volatility. “His British companion Bailey also reiterated the theory that “investors are doomed to lose money”.

Subsequently, Norway’s central bank and the Bank of Canada have highlighted the risks to the stability of cryptocurrencies. The Bank of Korea (BOK) recently submitted a document to lawmakers showing that it is seeking the power to monitor cryptocurrency transactions through users’ real-name bank accounts. Even in India, where the cryptocurrency market is booming, the country’s central bank recently unofficially urged banks to cut ties with cryptocurrency exchanges and traders.

Faced with a multi-national regulatory hounding, is Bitcoin finally on its way out? Xia Ping points out that bitcoin has become a global speculative tool, and its trading will continue to exist and the up-and-down price swings will continue in the future. Especially as countries strengthen their risk warnings, it may be harder for retail investors to make money from it.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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