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Bitcoin Takes a Strong Hit on a Possible Chinese Crackdown

November 4, 2016 at 20:20 by Yahia Barakah

The price of Bitcoin dropped on Friday to touch its lowest level since last week on new rumors that regulators in China might soon take actions to limit the usage of the digital currency within the nation.

An unconfirmed report said that Chinese officials are studying the possibility of imposing new restricting regulations for the amount of Bitcoins that can be transferred outside the country. The new regulations would apply to Bitcoin exchanges within China to prevent them from exceeding certain transfer quotas after regulators took notice of the way Chinese investors are using the virtual currency to evade fund outflow rules by buying Bitcoins with the nation’s official currency and selling them on offshore exchanges.

The rumored Chinese crackdown on Bitcoin wouldn’t be the nation’s first. The People’s Bank of China prevented banks and financial companies from using Bitcoin on December 5, 2013. And two weeks later the country’s regulatory institution also banned payment companies from processing payments done with Bitcoin.

Recent declines in the exchange rate of the Chinese yuan, which took it to the lowest level in 6 years, increased the appetite of Chinese investors for Bitcoin as a hedging tool against further depreciation. The crackdown rumors come as global investors expect the US Federal Reserve to raise its interest rates when the Federal Open Market Committee meets on December 14, which will further support the US dollar against the yuan.

The initial report came from Bloomberg but is no longer available, which raised questions about its authenticity. However, traders of the digital currency reacted in panic after weeks of gains that got the currency to touch its highest levels since June.

BTC/USD traded at 697.0 as of 20:09 GMT as the pair dropped from yesterday’s high at 745.3. BTC/USD touched 673.2 at 22:45 GMT yesterday, the lowest level since October 27.

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