All price data were collected on 12/02 18:00

China’s official attitude is firm: “Strengthen supervision to restrict blockchain crimes.” BTC price falls as low as US $6,156

The price of Bitcoin reached a recent new low of $6,156 on 11/25. This drop was mainly attributed to negative news releases from China. Starting 11/13, the official Weibo accounts of Binance and TRON have been blocked. On 11/15, news that China is about to widely rectify blockchain regulations were out. Binance, the world’s largest spot exchange, may also be affected. On 11/25, The People’s Court, the highest judicial body in China, released a message saying that to strengthen efforts to crack down on blockchain fraud and other criminal phenomena, the Chinese crypto community will face stricter regulatory environments. This set the Chinese government’s attitude towards its crypto community, causing prices to drop (see Figure 1-A).

Figure 1: BTC/USD (BitMEX) Recent trends (hourly line). Source: AIcoin.

The People’s Bank of China also released the “China Financial Stability Report (2019)” on 11/25. The report stated that due to promotions of special rectifications of internet financial risks, China’s online lending institutions have decreased from 5,000 to 1,490. And 173 crypto issuing or financing platform have exited. At the same time, a number of financial innovations were confirmed in the report, including the application of blockchain technology. At this point in time, the price of Bitcoin picked up slightly, ending the downward trend for a short period of time (see Figure 1-B).

China’s influence on the bull and bear market

After the Chinese Communist Party’s leader Xi Jinping announced that “blockchain is considered to be the core of the country’s key future development”, the price of Bitcoin reached a high point of $10,584, and then fell by 39% in the following month (Figure 2), indicating that the bear market has arrived. The rise and fall of crypto prices prove China’s heavy weighted influence in the market. Although the Chinese government has launched a number of major actions on blockchain technology, the CPC Central Committee’s attitude towards the crypto community is clear: while the application and development of blockchain technology is important, illegal financial activities are not allowed to flee to crypto. The attitude of the Chinese government shows strong support for blockchain, but not so much for cryptocurrencies. This also shows that crypto trading needs to have its relevant regulations improved as soon as possible to reduce its gray area.

Figure 2: BTC/USD (BitMEX) Recent trends (daily line). Source: AIcoin.

The Butterfly Effect Brings a Bear Market, Investors Formulate Countermeasures: Hold, Mirror trade, Lend

When the price of Bitcoin drops sharply, under the market elimination mechanism, small mining operations that do not have sufficient capital to form economies of scale will end up closing because the cost of expensive hardware equipment exceeds the profit of mining. And the mining profits affected by the price drop, according to statisticians, in order to fill the losses, miners may need to sell their own cryptocurrencies in exchange for cash, a move that will inevitably exacerbate the decline in currency prices. The butterfly effect is objectively present, investors should determine response measures of the bear market based on their own risk tolerances.

Bitcoin believers who continue to look forward to a bull market that may be led by the halving next year, based on estimates of BTC’s historical decline, mining costs, past bear market time periods, and the community’s activity level, should invest in batches and consider Bincentive’s listed strategies. It is expected that fluctuations will have a net increase in the amount of crypto the investors have in holding. The braver the entry is during the bear market, the more rewards will be obtained in the bull market.

History does not lie, but under the condition that there are many speculators in the cryptocurrency market, it is difficult to say whether it is purely fixed. For those with low risk tolerance, lending will be a good choice. The lending interest rates of well-known lending platforms mostly fluctuate with the price of crypto, sometimes sharply. For example, Bitfinex currently fluctuates within the range of 7–20% annualized returns (see Figure 3). Loans can be automated through a third party. Investors can evaluate third-party fees, annualized interest rate fluctuations, and platform handling fees (15% of Bitfinex loan proceeds are taken out). If you want to have a stable interest rate, you can refer to Bincentive’s new combinatory investment product: The Rock of BinFi (fixed income product), fixed interest rate at 12% annualized, exempt from setting third-party software to automatically lend, 1% platform handling fee for 6 months (contract duration). By stabilizing the benefits of lending, it ensures positive returns in a bear market, an investment area worthy of attention for those with low risk preferences.