Bitcoin crashes as China closes in

See the latest Australian dollar analysis here:

Macro Afternoon

The Bitcoin ponzi-scheme is imploding as I write, down by more than one third from its peak:

As China shuts the exchanges, from Yicai:

September 14, the first financial reporter from the local Internet Financial Governance Office of the regulators exclusive informed that the regulation has been on the domestic bit currency trading platform under the conclusion: “all shut down, and recently out of the market.”

On the evening of September 13, China Internet Finance Association (hereinafter referred to as “China Mutual Gold Association”) issued a risk that all kinds of so-called “currency” trading platform in China is not legally established basis. And said that the so-called “virtual currency” is becoming a tool for money laundering, drug trafficking, smuggling, illegal fund-raising and other criminal activities, investors should be vigilant and found that criminal clues should be immediately reported.

And the PBOC explains why, via Caixin:

China’s recent ban on cryptocurrency crowdfunding should not deter future research on blockchain technology that backs those “coins,” the country’s central bank said.

Last week, China became the first country to outlaw raising funds through virtual currencies that are built on this young and more secure computing technology. The People’s Bank of China (PBOC) and six other regulatory bodies deemed so-called initial coin offerings (ICOs) illegal, leading to the almost immediate closure of at least two-thirds of the country’s 60 ICO platforms.

Sun Guofeng, head of the PBOC finance research institute, defended the ban following some criticism that the move was extreme. It was the first time the central bank explained its policy stance on the record in public.

“The ICO ban was necessary and timely because ICOs involve illegally issuing tokens and securities to raise funds. They involve financial fraud, pyramid programs and other illegal activity,” Sun told central bank-backed Chinese Financial News.

He argued that blockchain is not — and should not be — just about cryptocurrency. Outlawing ICOs should not stop financial-technology firms from researching and developing blockchain technology that can be used in a wide array of applications unrelated to cryptocurrencies, he added.

In China, ICOs had surged in popularity this year, raising 2.6 billion yuan ($398 million) worth of new virtual currencies during the first six months of 2017, according to a government-backed study. 105,000 investors participated in 65 ICOs during the same period. That was 20% of the global total.

Thin end of the regulatory the wedge.

Houses and Holes
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  1. proofreadersMEMBER

    Thank you China for closing down this upstart competitor to what is the only genuine, easiest and substainable means of money laundering – residential property in the great southern colony.

      • “That’s why as a bank and an industry we have to always be vigilant and work with regulators, government and police to find new and smarter ways to prevent financial crime.” – That is NAB response.

        It should have been more like – “That’s why as a bank and an industry we have to always be vigilant and work with regulators, government and police to find new and smarter ways to cover up financial crime from the masses.”

      • You are incorrect, he’s some data on digital currency in China.
        (NOTE: your average Chinese money laundere (most of the Chinese TBH, deliberately or inadvertently through friends / family / services) probably doesn’t know how to do this, but they do probably pay someone who does know how….) – see figures below explains why some of this is going on.

        Here’s some data which essentially completely confirms a lot of it is money laundering.

        News from late Nov 2016

        Reaction to said news (remember Nov 2016) (click 1 year on the chart)


        Now, see this news also, Feb 2017…7257.10106.0.10389.….0…1.1.64.psy-ab..11.5.1308…0j33i160k1.C_N5oc7tl1k

        See the reaction for this time period in other digital currrency markets (again, click the 1Y chart)

        Now, finally look at your local property prices, especially if you live in Vancouver, Toronto, London, Sydney, Melbourne, Auckland.
        Any way money can be gotten out of China, it will be by the wealthy / ultra wealthy. The change to Melbourne in the past 5 years, is .nothing. short of utterly astounding. I repeat, *utterly astounding*, to the complete and utter detriment of the locals under 40 / 50 who don’t own a place, they’re boned. no chance now.

        Regarding litecoin, this one is .particularly. telling, that coin was the “b tier” coin to bitcoin, the silver to gold if you will. Like bitcoin, it had a big run several years ago and then, it died off to a stagnant level, logically so too, why should there even be more than 1 digital currency??
        So here’s a coin which has had it’s run, it’s settled to a flat, sensible price, then due to talk of China making some moves against BTC exchanges in Feb 2017, is suddenly .booming.insanely. in Mar 2017.
        Most of the world buy their goods from China, we’re sending our money to China en-masse, immense amounts of it, the wealthy there, are in turn getting out of the country and picking up the premium property around the world. Can’t blame them to be honest, devastating for some of the locals though (myself included)

        Bonus evidence of how it’s being spent, here

        More evidence (sourced here, on Macrobusiness)

    • Are people going to ATM’s in Australia and withdrawing $1.2 Million Australian dollars from their Bitcoin accounts ?

      No. Don’t be daft.

      They are however going to CBA and withdrawing $1.2 Million without any legal oversight what so ever.

      This has NOTHING to do with money laundering and everything to do with communism. And when it happens in the west you can substitute that with fascism.

      Communism and Fascism the only two real faces of the political coin – democracy and capitalism are the greatest illusion ever created.

  2. Arent ICOs quite different to bitcoin trading? To me it looks like china has actually removed bitcoin’s future competition.

    Am I missing something here?

      • Initial Coin Offerings ARE the exchanges. Bit Coin Miners – those are the vast warehouses with thousands of computers each with an array of custom processors which only compute the bitcoin algorithm are also – and one and the same – the exchanges.

        That’s how it works.

        These guys ARE the ledgers. So they mine for Bitcoin and at the same time get rewarded for keeping the ledgers.

        So this has zero effect on the Bitcoin exchanges themselves as they are distributed around the world, it has zero effect on Bitcoin at all really except removing those coins from circulation which were held by the exchanges.

        In my view this is NOT about shutting down Bitcoin (although that is definitely part of it) nearly as much as it is about providing the Chinese government an huge cache of Bitcoin.

        There is no way that the Chinese government can shut it down – none. They have to shutdown the internet.

        However – and here is the thing – China is literally a decade at LEAST in front of the west in terms of Quantum Computing. And quantum computing may well be able to interact with Bitcoin in interesting ways to reveal “who is what spending and how” – providing the state with exchanges and a vast cache of coins would be a powerful move.


      • The Traveling Wilbur

        Tis but a paper cut. The way the world works these days it’ll probably strangle supply eventually and have the effect of increasing demand.

        PBOC probably now long BTC. If I were them, I would be.

  3. Just after bought my first bitcoins from FOMO last week. What do you think should I buy some Australian property?

  4. So am I correct in thinking the Chinese were getting their money out of China to buy Aus property via Bitcoin? And now this channel is being shut? Good news? I’m never sure

    • I think this is just one of the channels being shut. They have few more open but as OJ commented in the past it is becoming more and more expensive and for the small end of town this channels will not be viable option.
      At the end only those that run big companies will be able to bring money into Oz but all those small players that are active in the $800k-$2.5m market will almost disappear. Especially if China drops the limit of funds each individual is allowed to take out – at the moment it is still $50k and is regulated but if this limit drops down to $20k or $10k then the music, for the small players, will almost stop.

    • No. They are not using Bitcoin to transfer millions of dollars to Australia – Bitcoin does have access to the real world, however it is generally an online currency with limited interaction with the real world – certainly no real means to exchange it for millions in cash.

      The money being transferred to Australia was being done via the Commonwealth Banks totally illegal money laundering ATM schemes.

      They also over price invoices for sales transactions out of Australia (sell a box of baby powder with retails for $10k for $500k – because the Chinese are desperate for it), etc, etc.

      There were literally people couriering money over the borders.

      Shadow banks transferring.

      But Bitcoin no.

      • “No. They are not using Bitcoin to transfer millions of dollars to Australia – Bitcoin does have access to the real world”

        Sorry, what?

        You can transfer hundreds of millions of dollars via bitcoin if you wanted, in fact, the value is arbitrary, the fees are dependent on the transaction size (in kilobytes to the ledger, not $) which is dependent on the number of addresses you’re sending from (i.e. it’s cheaper to send from 1 bitcoin address to 1 other, instead of 100 bitcoin addresses to 1 other).

        and “Bitcoin doesn’t have access to the real world”? What?

        You should take a look at the Australian exchanges (for example), there’s at least 5 major ones all with $10,000 – $50,000 daily withdrawal limits. You could take out millions easily over the course of a month.

        It’s also very easy to set up an untraceable path by trading to other cryptocurrencies. Even though bitcoin is traceable, others aren’t, so if you trade into the untraceables, then trade back, you’re not going to be found by chinese authorities.

  5. adelaide_economistMEMBER

    I got an idea this was crashing when over the last two to three days supply of graphics cards for PCs and AMD cards in particular have suddenly become in stock and at closer to normal retail prices. This is after months of cards being ‘bought’ at the factory gate in China and the few making it to retail in the West being bought up within seconds/minutes of going up for sale and then reappearing (ie being flipped) on eBay for a crazy mark up.

    Looks like I’ll be able to get a Vega 56 after all (which I’ll be using for non-profit scientific distributed computing). Thanks China! Now keep cracking down on that capital outflow into real estate…

    • Yeah I get quite a laugh out of all the claims that Quantum computing will change the whole world of encryption when in reality it’s GPU cores like the Vega10 and Volta100 that are doing the real damage. The Volta Tensor operations are really powerful IF you can code to use them effectively. Frankly I’m blown away by the raw performance of some Volta 100’s that I recently acquired, they’re fast.
      At the moment I’m playing around with massively parallel variants of simple simulated Annealing algorithms, GPU’s are just about perfect for this type of task. I’m also wondering how long before we start to see some form of entanglement becoming part of a GPU core, that’ll be the real game changer. I know from discussions with friends that they’re seeing some very weird new effects on sub 10nm analog integrated circuits which they suspect might be due to weak entanglement. It’s just an unexplained but highly correlated error at the moment, the real game changer will be when they can reliably replicate these errors, maybe we’ll see the reemergence of the hybrid analog compute engine with digital interface, the last time I played around with one of those weird things was back in the late 1970’s.
      We’re once again entering a period of exciting times in computing especially if you can wrap your head around some of the newer technologies and code in ways that make thermally efficient use of the on-chip resources

      • mate can you suggest some reading about this. i obviously believe nothing that i cannot work out for myself, being skeptical about everything. I’d love to understand some more about this. not so much high level claims, but more like steps.

        1. get x chip.
        2. run y lib to benchmark.
        3. use z lib to improve parallel performance and benchmark etc.

        like a link to a how to. so i can play with myself. much appreciated.

  6. Lol. All those chumps who bought in on this nonsense over the last few months will be truly rogered. Some people must be suffering enormous losses. Heh heh heh….

  7. I think using the words “ponzi-scheme” to describe bitcoin is pretty disingenuous H&H, in fact I’d say it’s just plain incorrect.

    A ponzi scheme is defined as a fraudulent investment that promises high returns with little risk – bitcoin very very explicitly notes the high risk and volatile nature of itself. Nobody has ever said bitcoin is anything but high risk.

    It also generates revenue through new investors. i.e. rob peter to pay paul. But bitcoin doesn’t generate returns. It’s a static investment with nothing like dividends or distributions.

    You might have hesitations, criticism, and concern about bitcoin, but calling it a ponzi scheme is just wrong. Criticise away, but do it accurately please.

    • A ponzi scheme is defined as a fraudulent investment that promises high returns with little risk – bitcoin very very explicitly notes the high risk and volatile nature of itself. Nobody has ever said bitcoin is anything but high risk.

      There are _shitloads_ of people who insist the long-term for Bitcoin is nothing but enormous positive returns ‘because there’ll only be 21 million [or whatever it is] Bitcoins evar and those Bitcoins will represent all the world’s wealth, so better get in early while they’re cheap’.

      • Are those people saying it’s risk free? Or even low risk? Or even medium risk? I think you can ask anyone and they will all agree it’s high risk.

        Something nobody can deny (no matter if they’re a true believer):

        – a fault in the code. If there’s a fault in the code the whole thing will fail. That is a risk that is enormous, and unavoidable.

      • Are those people saying it’s risk free?

        Over the *long term*, absolutely. That’s their whole argument underpinning the ‘there’s only 21 million of them’ reasoning. *Long term* you can’t lose if you get in early.