Before discussing anything further about Bitcoin China or the future, let’s ask — what does it take to make Bitcoins? The answer is either mining or exchanging the fiat currency for the digital currency. In both cases China seems to be having a greater advantage as compared to other economies in multiple dimensions.
The greatest fallacy when talking about China is to consider it as a government and a country. In this post, every caution has been exercised to see China as a geographic boundary that houses the People and not as a hierarchy that a nation is.
Bitcoin China – Made for Each other
Bitcoin industry’s greatest cost drivers and dependencies are the following listed below
- Bitcoin mining is an energy intensive process – it consumes great many watts of electricity.
- Trade volumes dictate the price of Bitcoin.
- Exchange fee rates that almost mimic the effect of interest rates by banks for fiat currencies.
- The newer technologies, innovations and the repurposing of the blockchain technology, often brought to light by startups – the start up ecosystem matters to Bitcoin
- How well/not-well are the fiat currencies doing in the macro-economic level of abstraction
The China Advantage
In relation to the five factors (not an exhaustive list) listed above that influence Bitcoin prices and stability, China has a few advantages:
- Energy Costs: Energy is cheaper in China
- Trading Volumes: Bitcoin-Yuan comprises 80% of the global trading volume on Bitcoin exchanges; we covered this recently on Newsbtc.
- Exchange Fee Rates: Bitcoin exchanges in China, unlike the ones in most other countries, don’t charge a fee for trading. This incentive mechanism has a power of its own – as free is the best business model, and free sells easier than cheap.
- Although the Chinese government has banned financial institutions from getting mixed up with digital currencies, the Bitcoin startups are untouched.
- The intentional weakening of the Yuan by the monetary easing policy makes Bitcoin shine even more as a lucrative trading option.
For a country to increase its dominance on Bitcoin global market share, any one of the five factors listed above could suffice. China seems to have all the five factors coming into play at various proportions, that gives it indomitable control over what Bitcoin will become in the future for all of us. If all these are still unconvincing, this link http://fiatleak.com/ can point the reader to an interacting map of the real-time Bitcoin Trade activity visualization. It is hard not to see the dominance that China has over Bitcoin.
PESTLE Scenario analysis of Bitcoin Dominance in China
PESTLE stands for Political, Economical, Social, Technological, Legal and Environmental.
In each of the above cases, ranging from Political to Environmental, China has multiple advantages. To maintain brevity in this long form article and for risk of stating the obvious, the political and the Social factors are the ones explored in detail. Here they are discussed in further depth.
The Government of People’s Republic of China is not entirely a poster-child of democracy. From the currency to conception, most of it is controlled with a long-term vision as to how the nation would function. This is a hard way to run a country given the increasingly free flow of information available to the youngsters in China. Bitcoin is information too. It is neither paper, nor plastic. Worse, Bitcoin currency is not even visible to the government’s eye.
Secondly, Beijing is not comfortable with letting Yuan’s intrinsic value to float freely. This unfortunately or fortunately, reflects on the Bitcoin’s extrinsic value.
It is extremely hard to move wealth out of China. It is by the very design of the economy and the collective behavioral traits, that it is kept that way.
This takes me back to an old article from 2013, by Business Insider, titled “Bitcoin Has No Intrinsic Value And Will Never Be A Threat To Fiat Currency”. Interestingly enough, the situations much like the ones in China with political and economic interference to wealth, has lead to Bitcoin gaining some intrinsic value of its own, in the minds of the Chinese beholders.
On a conclusory note, it is hard not to see the following about Bitcoin China and the Future!
One economy dominates roughly 80% of trade volumes of a global currency.
The future of this global currency that we call Bitcoin is still not concrete.
There is only a finite supply of Bitcoins.
It is hard not to see it coming. The BTC and PRC seem to be the future.
The question that we have to be asking ourselves and directing out mental energies to is this: Bitcoin (BTC) and People’s Republic of China (PRC) seem to be the future. Yes. The question is, in what combination and in what proportion? What is the failsafe for the rest of the world?
The greatest fallacy when talking about China is to consider it as a government and a country. In this post, every caution has been exercised […]