Chinese State Media Warns Against Leverage Trading Bitcoin
The massive effort to promote blockchain technology in China is only dwarfed by the state-wide effort to suppress the use of cryptocurrencies. Trading Bitcoin and other digital assets have long been banned in mainland China, with both state and local governments frequently dismissing the use and utility of the new asset class.
However, the latest bull run threatened to render all of these efforts obsolete, as many Chinese citizens seemed eager to invest in Bitcoin, which saw its price briefly reach $34,000 at the beginning of the year. According to a lengthy op-ed from the People’s Daily, the news about Bitcoin’s massive rally reached even the elderly population, with the report citing a 95-year-old as saying Bitcoin’s latest price rally was “making history.”
The news piece went on to cite thoughts and opinions from several industry leaders, all of which have warned that the bull run the market’s currently witnessing is more dangerous than it looks. The report noted that Bitcoin’s massive rise is most likely a result of fiscal measures such as money printing, which pushes people to abandon cash and turn to more scarce assets such as gold, silver, and digital assets with a fixed supply such as Bitcoin. When paired with a significant increase in institutional investors flocking to the crypto industry, this makes Bitcoin’s rally almost inevitable.
Nonetheless, the report cited industry experts as saying that the crypto bull market we’re currently in is a result of speculation. A chief researcher at the OKEx Research Institute told the People’s Daily that the recent rise in price Bitcoin has seen “has speculative and hype components.” He said that while the bull run was initially fueled by institutions, it’s now run by small and medium-size investors. These kinds of investors also tend to lose more money than large players, as they trade with 10x or more leverage. He warned investors to remain rational and recognize that Bitcoin is a high-risk investment with extremely volatile prices, not a safe-haven asset.
An unnamed source also told the People’s Daily that more and more people are flocking into cryptocurrencies as a way to make a quick profit. The source, who traded Bitcoin for a living a lost more than half of his crypto investments when the market crashed in 2017, said that the majority of people coming to him for investment advice are young, unemployed people.
“Most of them had never been to college and had never worked in a big city,” he told the People’s Daily. Most of those people have only a superficial understanding of Bitcoin and cryptocurrencies in general, and see the new asset class only as a way to speculate, he explained.