Halted BTC Exchanges Could Lead to Chinese Mt. Gox

  • Grace Noto
  • February 9, 2017
  • 1

pexels-photo-147430Bitcoin $1K is no more — this barely a day after three of the most popular currency exchanges issued statements warning users against exchanging with the currency.

The exchanges BTCC, OkCoin, and Huobi issued identical statements on their sites warning users of the high risk of bitcoin and citing their collective intentions to curb currency exchange through the cryptocurrency.

Huobi and OkCoin have each stopped bitcoin trading for one month. BTCC has issued a statement of risk, but at the time of this reporting has not yet halted the exchange.

Says cryptocurrency trader Jacob Eliosoff:

The most exciting question right now is whether assets will be lost –historically, ‘no withdrawals right now’ has been the standard precursor to an eventual ‘actually no withdrawals ever, i.e., your money is gone.’

The most prominent (and ominous) example of this situation, said Eliosoff, is the fate of now-defunct exchange Mt. Gox.

If it seems odd that cryptocurrency exchanges would need to remind cryptocurrency traders that these types of digital assets do not come attached to the normal fiat authorities, which is normally one of their biggest draws. This move does come amid increased regulatory scrutiny in China when it comes to cryptocurrency and those who trade in it.

The Feb 8 statements came after China’s central bank warned nine of the nation’s bitcoin exchanges (not including the Big Three above) about the risks bitcoin might pose on Feb 7, claiming the exchanges could be closed if caught violating regulations.

Last month, all three exchanges stopped margin trading on their sites, as well as introducing trading fees when it came to bitcoin and litecoin.

BTCC, OkCoin, and Huobi’s statements had an immediate effect on bitcoin’s price–according to Eliosoff, they account for “approximately 100% of [bitcoin’s] drop today.” The notoriously volatile digital currency dropped from over $1,000 to now hover around $960, according to data from CoinDesk.

According to Eliosoff, the final outcome of this could go one of three ways:

I’d say though there’s a chance that this will all blow over… it depends above all on the question above — whether this is a) a temporary inconvenience, b) a a permanent loss of Chinese trading venues but not a hit to holdings, or c) the full deal–depositors permanently unable to withdraw.

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