6 ms·

Why China is leading the global rise of Bitcoin

84 points by tjaerv 13y ago

VaucGiaps 13y ago
I am just getting a gray page here @ opera.
zhaodaxiong 13y ago
This is the exact reason that people should avoid bit coin... I am serious...
- supergauntlet 13y ago
  Why do you say that? I'm not saying that mining bitcoin is a good idea anymore (even with ASICS, really) but I'm curious as to your rationale?
  - apalmer 13y ago
    His slant seems pretty obvious... Even if he ends up being wrong the logic is self evident. Communist China is a totalitarian state, Communist China crushed another virtual currency that caught on a couple years back, therefore if the raise from ~$100 a bitcoin to ~$600 is due to chinese involvement you probably should assume its gonna go back to ~$100 as soon as the communist government flexes its muscles.
    - hayksaakian 13y ago
      The real question is: can then even do anything about a decentralized currency?
      - wmf 13y ago
        China drove up the exchange rate 3x; what makes you think they couldn't drive it right back down?
      - cmelbye 13y ago
        Block it from the Great Firewall?
      - JSZZHlmumeUE 13y ago
        The chinese govt has plenty of engineers and plenty of IC fabs. They are in the best position, even more so than the US govt, to execute the 51% attack.
    - jeremyrwelch 13y ago
      Chinese state television is one of the promoters of Bitcoin. From May: "At the end of last week China Central Television, a state-run broadcaster, aired a documentary offering an overview of bitcoin and its potential benefits. Given the tight controls the Chinese government has over mainland media, this was not just tacit approval from the world’s second largest and centrally-run economy..." from: http://thegenesisblock.com/bitcoin-the-newest-tool-in-chinas-currency-war-chest/ http://thegenesisblock.com/bitcoin-the-newest-tool-in-chinas...
    - deleted 13y ago
      [deleted]
- lignuist 13y ago
  Should we also avoid other things that Chinese people are adopting, like rice and smartphones?
hkmurakami 13y ago
We'll looks like the Chinese govt will now have a huge motivation to thwart bitcoin's rise within its borders.
gmays 13y ago
If you look into China's real estate market they've invested billions to build cities...empty cities. They continue to build because citizens' investment options are limited, so real estate is one of the few "attractive" options. So they end up with ghost cities full of unoccupied office buildings, condos, malls, etc. Crazy, right? And now they have bitcoin to put their money into. That's a large part of what's driving the boom. And you know what? It'll keep going. If they're willing to invest billions in ghost cities they're willing to drive bitcoin above $10,000. I'm not bold enough to claim that bitcoin is a bad investment, but to me it seems closer to gambling than investment. As long as it's money you're not afraid to lose, go for it. But for me there are too many uncertainties and I'm not willing to invest the time. There are so many other opportunities. Edit: Here's some info on the ghost cities http://www.forbes.com/sites/kenrapoza/2013/09/24/what-investors-really-think-about-chinas-ghost-cities/ http://www.forbes.com/sites/kenrapoza/2013/09/24/what-invest...
- Amadou 13y ago
  And you know what? It'll keep going. If they're willing to invest billions in ghost cities they're willing to drive bitcoin above $10,000. I think that is an unfounded conclusion. The ghost city phenomenon is a lot more than just "no other investment vehicles." The process of building ghost cities is ripe with corruption, everybody in the chain gets a cut of what is ultimately land-confiscation and government funded construction loans. Straight out bitcoin speculation isn't even in the same league of opportunities for corruption.
- fleitz 13y ago
  Imagine a country where 1 million extra housing units only represented 1/1300th of the housing needs for the nation. Imagine someone having built 625 extra apartments in SF. China is trying to urbanize 300 million people, a ghost city here or there is a drop in the bucket.
- kristianp 13y ago
  If Chinese people are using bitcoin to bypass government controls, how long before the Chinese government cracks down on it?
- 13y ago
VMG 13y ago
Fun fact: btcchina is trading at ~5400CNY/BTC right now, which is approximately $880 while the average on other exchanges is $700. Good day for arbitrage. btcchina: http://bitcoinity.org/markets/btcchina/CNY http://bitcoinity.org/markets/btcchina/CNY bitstamp: http://bitcoinity.org/markets/bitstamp/USD http://bitcoinity.org/markets/bitstamp/USD
- bernatfp 13y ago
  I have noticed that this is happenning with other Chinese exchanges such as OKcoin and FXBTC as well. There must be a reason why this arbitrage exists. It's probably the difficulty to close the loop between cashing out in RMB and funding your account on Bitstamp with €/$. Meanwhile the safest way to do arbitrage is between BTC-E and Bitstamp because they both have low fees for SEPA deposits/withdrawals. Must be European though.
- panarky 13y ago
  Good point. As I write this, BTC-China is at 5680 RMB, or 932 USD. Bitstamp is 655 USD, Gox is 776 USD. Maybe China is driving the demand and other exchanges are arbitraging against China. Since there's a lag in transferring funds into exchanges, the 20% to 40% premium in China may just be a measure of latency in a fast-moving market. If so, then we'll see the prices converge over time, and we should use BTC-China as a leading indicator of exchange rates.
  - bernatfp 13y ago
    FWIW, if you are seriously into arbitraging, you won't keep transferring funds between both exchanges to finish the cycle of buying-selling. What you will actually do is having half of your funds on both sites and execute both operations on both sites at the same time to have them match.
    - gigq 13y ago
      Yep, that's the only way to do it with zero risk. But since btcchina.com is consistently higher than the other top exchanges you'll eventually have to move CNY out of there and bitcoin in. Moving bitcoin there is trivial (which shows how great bitcoin is) but moving CNY out and converting it to USD for the other exchanges is trickier (need a Chinese bank account for example) so I would expect the lag in price to continue.
AJ007 13y ago
Speculation excluded, currency controls would be a good reason for a Chinese citizen to "invest" in bitcoin (and cash it out on USD at the other side.)
- D9u 13y ago
  #include <speculation.h> Why cash out on USD when you can avoid doing so? As BTC becomes more widely accepted the ubiquity of BTC acceptance will grow
dualogy 13y ago
What everyone needs to understand is that Bitcoin is a gift from heaven for every "productive" country's central bank. Much of the world is trying to get away from the USD as a global "reserve" and trade-settlement currency, without the masses jumping into gold and without pissing of the US (govt, economy, Wall St). Bitcoin is so much more "tolerated" by Germany and China than it is by the UK and the US, it's pretty obvious. You don't really want the masses to rush into gold -- it needs to stay cheap so oil can stay cheap for whole economies, and central banks can acquire more of it for a future when intra-national trade imbalances may be settled in a proven, timeless, globally-accepted (at the central bank level) reserve asset that's not subjected to any one nation-state's (or state union's) wims or woes. You also don't want the savers to store their excess savings or retirement funds in USD or even your own currencies, because they'll be screwed over. You also don't want all the excess liquidity printed over the last 5ish years to end up as real-world price inflation on store shelves. Something like Bitcoin solves all these beautifully, and carries no diplomatic concerns because it's something that citizens are now just free to adopt as they see fit. You think the Chinese want USD long-term? Why on earth would they? They wanna convert them into other wealth assets, even BTC if they like, asap. Think about the situation today or more so the last decade or three: they export something, take in USD. The producer takes those to their bank to convert into spendable yuan. Their bank takes those to the central bank for yuan. Their central bank doesn't wanna sit on them either so (traditionally) they buy treasuries for those USD, which sends the USD back home to the US where Americans go on the next shopping spree of buying Chinese (in our example) goods (circle repeats), and when the treasury is due, freshly printed USD plus a small interest "gain" go to China central bank and they're left holding the bag once again. What to do with those homeless USD? It's called reserve-currency privilegue and really the world would be happy to abandon it, but you can't just flip the switch or madness would ensue. Similar situation for the majority of producing-and-exporting countries. Food for thought!
- seanmcdirmid 13y ago
  > globally-accepted (at the central bank level) reserve asset that's not subjected to any one nation-state's (or state union's) wims or woes Gold is hardly that; Chinese reserves of gold right now are unknown, but they are currently the largest miner and buyer of it (the government, consumers also buy). Given that we aren't sure what the real supply is (China's biggest state secret), the price of gold will remain volatile. > You think the Chinese want USD long-term? Why on earth would they? They want to continue to sell us stuff without overheating their economy, which is why they are happy to buy treasuries at a loss (the interest is not high enough to cover inflation). No one is really unhappy, even the Chinese, that USD is a reserve currency as long as the American economy is robust enough to be the largest consumer as well as a debtor of last resort (via treasuries). Bitcoin does nothing here: the US is a safe entity to lend to, Bitcoin doesn't magically create a similar entity. Put it this way: money simply can't be saved without someone else spending that same money at the same time. China couldn't just sit on all of their USD, gold, or bitcoins even if they wanted to. Buying and sitting on gold doesn't magically create or even preserve value that you can call on to use in the future. The fix for China is simply to promote more domestic consumption so they need to save less, which would also balance out the export/import deficit. Given that consumption can only be increased gradually (too much inequality in China), this isn't going to happen with a switch flip and in the meantime the Chinese would definitely prefer stability.
deleted 13y ago
[deleted]
known 13y ago
American economy will continue to slide till https://en.m.wikipedia.org/wiki/Triffin_dilemma https://en.m.wikipedia.org/wiki/Triffin_dilemma is resolved. http://www.washingtontimes.com/news/2013/nov/13/bill-would-outlaw-us-dollar-russia/ http://www.washingtontimes.com/news/2013/nov/13/bill-would-o...

84 points by tjaerv 13y ago

VaucGiaps 13y ago

I am just getting a gray page here @ opera.

zhaodaxiong 13y ago

This is the exact reason that people should avoid bit coin... I am serious...

supergauntlet 13y ago
Why do you say that? I'm not saying that mining bitcoin is a good idea anymore (even with ASICS, really) but I'm curious as to your rationale?
- apalmer 13y ago
  His slant seems pretty obvious... Even if he ends up being wrong the logic is self evident. Communist China is a totalitarian state, Communist China crushed another virtual currency that caught on a couple years back, therefore if the raise from ~$100 a bitcoin to ~$600 is due to chinese involvement you probably should assume its gonna go back to ~$100 as soon as the communist government flexes its muscles.
  - hayksaakian 13y ago
    The real question is: can then even do anything about a decentralized currency?
    - wmf 13y ago
      China drove up the exchange rate 3x; what makes you think they couldn't drive it right back down?
    - cmelbye 13y ago
      Block it from the Great Firewall?
    - JSZZHlmumeUE 13y ago
      The chinese govt has plenty of engineers and plenty of IC fabs. They are in the best position, even more so than the US govt, to execute the 51% attack.
  - jeremyrwelch 13y ago
    Chinese state television is one of the promoters of Bitcoin. From May: "At the end of last week China Central Television, a state-run broadcaster, aired a documentary offering an overview of bitcoin and its potential benefits. Given the tight controls the Chinese government has over mainland media, this was not just tacit approval from the world’s second largest and centrally-run economy..." from: http://thegenesisblock.com/bitcoin-the-newest-tool-in-chinas-currency-war-chest/ http://thegenesisblock.com/bitcoin-the-newest-tool-in-chinas...
  - deleted 13y ago
    [deleted]
lignuist 13y ago
Should we also avoid other things that Chinese people are adopting, like rice and smartphones?

hkmurakami 13y ago

We'll looks like the Chinese govt will now have a huge motivation to thwart bitcoin's rise within its borders.

gmays 13y ago

If you look into China's real estate market they've invested billions to build cities...empty cities. They continue to build because citizens' investment options are limited, so real estate is one of the few "attractive" options. So they end up with ghost cities full of unoccupied office buildings, condos, malls, etc. Crazy, right? And now they have bitcoin to put their money into. That's a large part of what's driving the boom. And you know what? It'll keep going. If they're willing to invest billions in ghost cities they're willing to drive bitcoin above $10,000. I'm not bold enough to claim that bitcoin is a bad investment, but to me it seems closer to gambling than investment. As long as it's money you're not afraid to lose, go for it. But for me there are too many uncertainties and I'm not willing to invest the time. There are so many other opportunities. Edit: Here's some info on the ghost cities http://www.forbes.com/sites/kenrapoza/2013/09/24/what-investors-really-think-about-chinas-ghost-cities/ http://www.forbes.com/sites/kenrapoza/2013/09/24/what-invest...

Amadou 13y ago
And you know what? It'll keep going. If they're willing to invest billions in ghost cities they're willing to drive bitcoin above $10,000. I think that is an unfounded conclusion. The ghost city phenomenon is a lot more than just "no other investment vehicles." The process of building ghost cities is ripe with corruption, everybody in the chain gets a cut of what is ultimately land-confiscation and government funded construction loans. Straight out bitcoin speculation isn't even in the same league of opportunities for corruption.
fleitz 13y ago
Imagine a country where 1 million extra housing units only represented 1/1300th of the housing needs for the nation. Imagine someone having built 625 extra apartments in SF. China is trying to urbanize 300 million people, a ghost city here or there is a drop in the bucket.
kristianp 13y ago
If Chinese people are using bitcoin to bypass government controls, how long before the Chinese government cracks down on it?
13y ago

VMG 13y ago

Fun fact: btcchina is trading at ~5400CNY/BTC right now, which is approximately $880 while the average on other exchanges is $700. Good day for arbitrage. btcchina: http://bitcoinity.org/markets/btcchina/CNY http://bitcoinity.org/markets/btcchina/CNY bitstamp: http://bitcoinity.org/markets/bitstamp/USD http://bitcoinity.org/markets/bitstamp/USD

bernatfp 13y ago
I have noticed that this is happenning with other Chinese exchanges such as OKcoin and FXBTC as well. There must be a reason why this arbitrage exists. It's probably the difficulty to close the loop between cashing out in RMB and funding your account on Bitstamp with €/$. Meanwhile the safest way to do arbitrage is between BTC-E and Bitstamp because they both have low fees for SEPA deposits/withdrawals. Must be European though.
panarky 13y ago
Good point. As I write this, BTC-China is at 5680 RMB, or 932 USD. Bitstamp is 655 USD, Gox is 776 USD. Maybe China is driving the demand and other exchanges are arbitraging against China. Since there's a lag in transferring funds into exchanges, the 20% to 40% premium in China may just be a measure of latency in a fast-moving market. If so, then we'll see the prices converge over time, and we should use BTC-China as a leading indicator of exchange rates.
- bernatfp 13y ago
  FWIW, if you are seriously into arbitraging, you won't keep transferring funds between both exchanges to finish the cycle of buying-selling. What you will actually do is having half of your funds on both sites and execute both operations on both sites at the same time to have them match.
  - gigq 13y ago
    Yep, that's the only way to do it with zero risk. But since btcchina.com is consistently higher than the other top exchanges you'll eventually have to move CNY out of there and bitcoin in. Moving bitcoin there is trivial (which shows how great bitcoin is) but moving CNY out and converting it to USD for the other exchanges is trickier (need a Chinese bank account for example) so I would expect the lag in price to continue.

AJ007 13y ago

Speculation excluded, currency controls would be a good reason for a Chinese citizen to "invest" in bitcoin (and cash it out on USD at the other side.)

D9u 13y ago
#include <speculation.h> Why cash out on USD when you can avoid doing so? As BTC becomes more widely accepted the ubiquity of BTC acceptance will grow

dualogy 13y ago

What everyone needs to understand is that Bitcoin is a gift from heaven for every "productive" country's central bank. Much of the world is trying to get away from the USD as a global "reserve" and trade-settlement currency, without the masses jumping into gold and without pissing of the US (govt, economy, Wall St). Bitcoin is so much more "tolerated" by Germany and China than it is by the UK and the US, it's pretty obvious. You don't really want the masses to rush into gold -- it needs to stay cheap so oil can stay cheap for whole economies, and central banks can acquire more of it for a future when intra-national trade imbalances may be settled in a proven, timeless, globally-accepted (at the central bank level) reserve asset that's not subjected to any one nation-state's (or state union's) wims or woes. You also don't want the savers to store their excess savings or retirement funds in USD or even your own currencies, because they'll be screwed over. You also don't want all the excess liquidity printed over the last 5ish years to end up as real-world price inflation on store shelves. Something like Bitcoin solves all these beautifully, and carries no diplomatic concerns because it's something that citizens are now just free to adopt as they see fit. You think the Chinese want USD long-term? Why on earth would they? They wanna convert them into other wealth assets, even BTC if they like, asap. Think about the situation today or more so the last decade or three: they export something, take in USD. The producer takes those to their bank to convert into spendable yuan. Their bank takes those to the central bank for yuan. Their central bank doesn't wanna sit on them either so (traditionally) they buy treasuries for those USD, which sends the USD back home to the US where Americans go on the next shopping spree of buying Chinese (in our example) goods (circle repeats), and when the treasury is due, freshly printed USD plus a small interest "gain" go to China central bank and they're left holding the bag once again. What to do with those homeless USD? It's called reserve-currency privilegue and really the world would be happy to abandon it, but you can't just flip the switch or madness would ensue. Similar situation for the majority of producing-and-exporting countries. Food for thought!

seanmcdirmid 13y ago
> globally-accepted (at the central bank level) reserve asset that's not subjected to any one nation-state's (or state union's) wims or woes Gold is hardly that; Chinese reserves of gold right now are unknown, but they are currently the largest miner and buyer of it (the government, consumers also buy). Given that we aren't sure what the real supply is (China's biggest state secret), the price of gold will remain volatile. > You think the Chinese want USD long-term? Why on earth would they? They want to continue to sell us stuff without overheating their economy, which is why they are happy to buy treasuries at a loss (the interest is not high enough to cover inflation). No one is really unhappy, even the Chinese, that USD is a reserve currency as long as the American economy is robust enough to be the largest consumer as well as a debtor of last resort (via treasuries). Bitcoin does nothing here: the US is a safe entity to lend to, Bitcoin doesn't magically create a similar entity. Put it this way: money simply can't be saved without someone else spending that same money at the same time. China couldn't just sit on all of their USD, gold, or bitcoins even if they wanted to. Buying and sitting on gold doesn't magically create or even preserve value that you can call on to use in the future. The fix for China is simply to promote more domestic consumption so they need to save less, which would also balance out the export/import deficit. Given that consumption can only be increased gradually (too much inequality in China), this isn't going to happen with a switch flip and in the meantime the Chinese would definitely prefer stability.

deleted 13y ago

[deleted]

known 13y ago

American economy will continue to slide till https://en.m.wikipedia.org/wiki/Triffin_dilemma https://en.m.wikipedia.org/wiki/Triffin_dilemma is resolved. http://www.washingtontimes.com/news/2013/nov/13/bill-would-outlaw-us-dollar-russia/ http://www.washingtontimes.com/news/2013/nov/13/bill-would-o...