Bitcoin extends losses to drop below $4000 amid China uncertainty

China may ban bitcoin exchange trading

"I would assume that if China shuts down trading on continuous order books of the large exchanges, the price would drop below $4,000, or the price of the USA dollar price of bitcoin would catch up to where it's trading equivalently in China, " he said. As Fortune points out, Chinese investors use Bitcoin to protect themselves in case the yuan crumbles. Like bitcoin, the prices have bounced off this level and it trades above $300 as of this writing but the uncertainty and the risks continue to dominate the market in the short term.

Chinese regulators ordered a halt to all virtual currency trading platforms in the country, acting to further rein in risks related to cryptocurrencies, Caixin learned from a source close to regulators.

Notably, the ban has yet to be officially announced in China, according to the Wall Street Journal. Owning Bitcoin and other virtual currencies would still be allowed, but users won't be able to exchange it into fiat currency online.

There are conflicting information regarding China's alleged order for virtual currency exchanges to shut down, as several Chinese exchanges such as Huobi and Okcoin have said they haven't any orders from the government. Bitcoin's growing popularity in China may have caused the government to begin to perceive it as a threat to local currency, especially as Chinese investors bought up bitcoin and bet against the yuan previous year. No official proclamations have been issued by the Chinese government or regulators, although some exchanges are already taking steps and indicating they have been contacted.

The country accounts for a hefty portion of the Bitcoin market, with about 18% of trades being conducted in Chinese yuan, according to CryptoCompare.

The currency went into freefall on Friday, after reports that China was about to ban cryptocurrency exchanges.

Within a period of three days, bitcoin experienced two minor corrections, pulling back the upward momentum and strong rally it had maintained for a few weeks. However, the Chinese market has shown that it does not necessarily perceive the suspension as a threat.

Related news: