Crypto Investing #57 – China’s Effect On Bitcoin & Cryptocurrencies

Tai Zen: What’s up guys. This is Tai Zen. On Google hangout with me today, I got the Honorable Grandmaster, the Oracle cryptocurrency, LeonFu.com. Where you are broadcasting from, LeonFu.com?

Leon: Austin, Texas as always.

Tai Zen: I’m broadcasting from the west side of Atlanta. In this video, we want to talk about the effect that China has on Bitcoin and cryptocurrencies.

As we’re speaking right now, Bitcoin has dropped $150 USD in the past hour. It was like right around $1060, $1070. Now it tanks all the way down to as low as…

Leon: I see $913.

Tai Zen: Yeah. We want to make this quick video to explain what’s going on and the effect that China has on Bitcoin so that you don’t panic and don’t sell out too early or at least you’ll make the right decisions on your Bitcoin investments and your cryptocurrency investments.

Do you want to take explain real quick about what caused it dropped $150 in the last hour?

Leon: It sounds like the Chinese government’s making a move here. What they’ve done is they suspended Bitcoin and Lite coin withdrawn at the Chinese exchanges. Do you know which 2 exchanges are suspended?

Tai Zen: I don’t think it’s important so much at this moment.

Leon: Anyway, there are 2 major exchanges. I don’t recall them right now.

Tai Zen: I’ll find it quick and you talk about the effect that it had.

Leon: What happened is they are suspending Bitcoin and Litecoin withdraws from the exchanges. You can still withdraw in Fiat your deposit, but you can’t take any Bitcoins which kind of defeats the whole purpose of a Bitcoin exchange.

You can buy Bitcoins, but you can’t take them out at least for a month that they’re doing KYC/AML

Tai Zen: For anyone that’s new to a cryptocurrency investing, KYC stands for Know Your Customer and AML stands for Anti-Money Laundering. They have laws in place in most Western countries. In all the Western countries, they have KYC and AML laws where the bank has to report to the law enforcement or the government agency when someone is moving $10,000 or more or if they want to put $10,000 into the exchange.

I’m not sure what the exact limits are in the European countries, Canadian or Australian countries, but in every western country, there’s some type of limit or some type of anti-money laundering law that they have in place to make sure that people don’t try to launder drug, money, terrorist’s money or things like that altogether.

You and I were discussing on the phone right before we started this broadcast. That’s why I suggested that we share our discussion with the cryptocurrency community. You talked about how each time China has one of these announcements with the cryptocurrency community or the Bitcoin community, it’s starting to have less and less of effect. Could you recap that coming?

Leon: I think the government knows that they can’t ban Bitcoin. I believe that if they knew they could enforce such a ban, they would do it. Not just the Chinese government, but I think pretty soon all the major governments will realize that they can’t ban it. They can’t just make it eternally. If they tried to do that, they know what’s going to happen. It’s just going to move to the black markets. It’s just going to move to a country that is outside of their jurisdiction, then they’ll completely lose control over it.

What I tweeted that they can’t overplay their hand. They just can consider what controls they can place and have at least some control over Bitcoin and cryptocurrencies. I think what’s happening is they’re exploring that.

If we look at our charts here, we ran all the way to the $1140. Then, on January 4th or sometime around there, the Chinese government officials paid a visit to all the major exchanges. The result of that was they made them impose trading fees where we had a lot of zero trading fees going on. I think they also made them reduce or eliminate margin trading.

The effect of that was we dropped all the way down to below $800, but that didn’t really last that very long. If you just look at the charts, we bought them down on January 11th, then we rallied all the way back. It was like 2 weeks to make up all those losses.

When they’re coming back, it looked like we were about to break the all-time heights again. Now, they do this and what we see is over the past few years, each time they come out or each time an exchange gets hacked, it’s having less and less of an effect on the price.

I expect that pattern to continue. I’m really curious now that they’ve made this move to freeze all Bitcoin withdraws. How many days or how many weeks it takes for the price to recover? If I’m going to place a bet here, I think we recover within 2 weeks, maybe sooner.

I don’t think this drop is going to last very long. In other words, I believe this it’s a buying opportunity. That’s what I think.

Tai Zen: I have to agree with you on that. I personally would say less than 30 days just to be safe, but I don’t see it lasting very long. There was something that Andreas Antonopoulos said a while back. He said that the Bitcoin network has been having been around for many years now.

Since 2009, it’s been getting hacked every day. People are attempting to crack the Bitcoin blockchain to steal people’s Bitcoins and stuff. What it’s done is one of the few pieces of software out there that become resilient. It’s like its immune system is building up a tolerance to all these hacks and these attacks.

What’s funny that Andreas said that with regards to the technical side of a Bitcoin, but what he didn’t mention and will mention is the financial immunity that it has. He was talking about how hackers are trying to hack into the Bitcoin network, and I want to mention in this video about how every time the government, the financial institutions, and exchanges get hacked or they make laws and regulations.

I remember there was a time when the guy was in charge of the financial department of New York required that anybody who was doing business with any type of Bitcoin business had to get a license that’s called a Bit License.

After he got that law in effect, he quitted and retired. Now, he’s consulting with people on how to get the Bit License. It’s a conflict of interest because you put this law in place before you left office, and now you’re charging people to help them get the Bit License.

Leon: It happens all the time in the government. In American government, Goldman Sachs becomes a treasury secretary and they made the rules there. After they left the government, they made millions of dollars.

It’s almost as if they’re being paid off. It is like when you become a regulator and make the rules after you leave office, the industry pays you for making those laws or consulting fee for helping them comply with the laws that you made.

Tai Zen: To understand the laws and regulations before you get to the industry.

Leon: As if that wasn’t like a bribe being paid for you to make those laws that they want you to enact.

Tai Zen: Backward to what I was saying about Bitcoin financial immunity when the central banks and places come out with all these announcements, bans, regulations and the restrictions on the Bitcoin network, it’s getting less and less of an effect.

On the first time, they had these restrictions and regulations, it took this much time for the Bitcoin price to bounce back up. Each time they do it, the window in which it has an effect on Bitcoin gets less and less. I think that there’s going to come to a point where there’s going to be an announcement from the peoples of the bank of China or any government, which has no effect on it because the Bitcoin network has become financially immune to their regulations and their restrictions.

Leon: I think when we look back together one year from today, we’re going to be saying don’t you remember the day when the government would announce something and the price would crash.

Tai Zen: I think what you’re saying is true because they realize it and they’re trying to figure out what to do.

Leon: I don’t think these guys are stupid. I don’t believe anyone in any government official and any major country doesn’t realize this. However, at the same time, it’s their job to regulate the financial markets, so they’re trying to figure out what they can do and they already know they can’t bend it.

In fact, they could, but they get one shot. If any countries decide they’re banning Bitcoin, they’re going to have to follow through or the market next time just calls your bluff.

It is like poker. You have a hand. You’re going to bet it. Sooner or later, you’re going to get called and show your hand. That’s something the government is very careful because they don’t have a hand.

Tai Zen: We understand that when the Chinese government and other governments put these regulations on Bitcoin, we know that it’s having less of an effect on the Bitcoin network. For an investor, what do you think that they should do?

For me personally, I’m going to hold my Bitcoins right through because I know that doesn’t mean anything. Within a few weeks or days, Bitcoins going to bounce right back up.

Since our channels are so popular among the currency community, not to say there’s going to be a lot of new cryptocurrency investors that’s coming in for the first time and experience a short-term crash like this from a government-issued decree, what are your thoughts on what the both the new and current investors should do?

Leon: I think it depends on the situation each individual investor or trader is in. If you have a job and you have new money coming because you work and you’re saving for the long term, these crashes are an opportunity.

I thought the last rally we’ve had in the last couple weeks. I thought that was the last time we would get Bitcoin under $1000. I did not think that we would have another chance to buy Bitcoin under $1k.

Tai Zen: I have to interject on that too. I agree with you on. When I woke up this morning, I was surprised to see that the Bitcoin price was under $1000. If I had not loaded up on all the Bitcoins that I needed, I would look to maybe add some more to my position.

Although I’m already maxed, if I could, around near the $900 would be where I would look to add on. As you said, this is probably a shock to everyone that’s been in Bitcoin because that rally up is unexpected.

In China, the word for crisis is made up of 2 symbols. The first symbol is for danger. I think that the second symbol means opportunity. Therefore, in China, a crisis is a time of danger, but it’s also a time of opportunity. You can look at this crash as a time of danger or you can look at a time of opportunity to get into a Bitcoin at a lower price.

Leon: For those of us that are maxed out, we’re in it for the long term and we see this pattern has less and less effective. Therefore, we just hold. There’s nothing to do. I mean it sucks that we took a short term hit and if you had to sell, it would have been nice to sell yesterday.

However, most of the world does not own a single Bitcoin. Most of the world means many people who are listening to us still do not have a single Bitcoin. If I go up to people and say do you know what Bitcoin is, I think I would say most people that I walk up to today at least heard of what a Bitcoin is. Even though they don’t understand how it works or what it is, they know about it, so it’s an opportunity for people who don’t yet own a single Bitcoin to actually get in.

For the past 9 years, you should have bought every single crash. I mean we’re near all-time heights. The move to make since Bitcoin started trading in 2010 on Mount Gox was to buy after every crash and you would have made tons of money.

On the other hand, maybe there’s a lesson for the rest of Bitcoin community for a long time if you still want to keep cash on hand like USD perhaps because you want to take advantage of opportunities like this. We shouldn’t be all in all the time on Bitcoin if you had some opportunities like this.

I don’t think this is going to be the last time Bitcoin crash. If the long-term trend is up, which it has been over the past 8 years, there’s plenty of crashes along the way. It means if you have cash, you can still take advantage of these.

I think that those are my thoughts that if you’re new, it’s a chance to buy. If you already in, just hold. If you’re a trader, this is perhaps an opportunity for you because you have both Bitcoins and cash to trade. That’s what traders do is to trade these swings. Those are my thoughts.

Tai Zen: Now we explain what’s causing the crash and the diminishing effect that it has on the price of Bitcoin. If you guys have any questions, go ahead and type them in the chat box. Please ask questions is relevant to China’s effect on Bitcoin. If you ask questions about something else, we’ll avoid it. If you have some questions regarding the topic here at hand, we’ll go ahead and answer for it for you right now.

While we’re waiting for the questions to come in, I’m sure that there are some Chinese people or Chinese traders and investors that were not happy with the people’s bank of China eliminating the bottom margin trading and forcing the exchanges to add fees to it.

However, I think that’s actually a good thing because now there’s no more funny shenanigans coming out of those exchanges and all the fake trading volume that’s coming out of it. I think they actually did us all a favor by cleaning up that margin.

Leon: Another example of why you should not keep Bitcoin on exchanges. It’s not just hacking. We always said that don’t keep your crypto on an exchange like getting in, do your trading and get out. If you’re an active trader, that’s not practical because of an active trader trade every day so they need to keep their money on the exchange.

However, for those of us that are medium to long term holders, don’t keep your money on the exchange. If you had any money on those, it’s not a hack, but it’s as good as a hack because you just lost access to all the Bitcoins on those exchanges if the government froze it.

If you were trading on those Chinese exchanges, any Bitcoins you had will be lost because the government has told those exchanges not to release any more of your Bitcoins. You didn’t lose your money but the only way for you to take out your money now is you have to sell those Bitcoins at these low prices in order to get your money out of those exchanges. Therefore, it’s almost as bad as a hack. Would you agree with that, Tai?

Tai Zen: I agree. Instead of getting hacked by hackers, you getting hacked by the government. They can do it and no one can say anything about it. We have 3 questions that came in. We just go ahead answer it really quick and conclude this video broadcast.

The first question:” How does this affect the forward remittance use case for Bitcoin in China?” Personally, I don’t think it has any effect.

For anyone that’s new to a Bitcoin, remittances where you send family money back to your family or friends or colleagues back in the country that you come from.

If you come from China and you want to send money back to your friends, families, co-workers, your colleagues in China, the government cannot prevent you from doing that because you just jump on the Bitcoin network and send it.

Leon: This is going to cause a jump in things LocalBitcoins. For readers who don’t know LocalBitcoins, there are a few companies that do this, but LocalBitcoins is perhaps the biggest. There’s also BitQuick and others.

A way to do remittance is you just send your Bitcoins to something like a LocalBitcoins and you tell somebody in that country that wants to buy Bitcoins to deposit cash directly into that person’s bank account.

That’s something impossible to ban, but certainly, that’s very hard to prevent people from just going in, dropping cash and putting Bitcoins upon a service that is outside of the country. For example, LocalBitcoins is based in Finland. They act as an escrow. You just deposit your Bitcoins with a third party. Somebody just goes and drops cash into a bank account, then the Bitcoins are released to that person.

I don’t see a practical way to ban something like that unless you start stopping cash deposits in your whole banking system. I don’t think it affects the remittance market at all.

Tai Zen: The next question from Adam. He says why they try to regulate Bitcoin and what the purpose of that is.

I can answer that. The reason why they want to regulate it is to prevent money laundering from drug dealers and from terrorist groups. The government wants to know where the money is flowing because if people can send their money into the exchanges and convert it to Bitcoin, they can send it anywhere they want.

One of the problems that China is having is since they’re cracking down on corruption and stuff, there’s a lot of people taking their money out of China to store it in other countries and cities around the world, so Chinese government doesn’t come after.

In America, we have a lot of people from China bringing their money to Miami, New York, California, etc. and buying up properties and stuff. One of the things that the Chinese government’s doing is they’re playing what’s called capital controls, which means that they are restricting the flow of currents of money from China from letting it go into other countries.

The reason why they want to regulate it and control the Bitcoin exchanges is they want to prevent people from sending money out of China without knowing about it.

The next question is from Peter. He says whether we have any stats on how many coins are stored on the exchanges. I think that’s something that Andreas Antonopoulos has spoken about. He said that we need some type of proof of reserve and right now there’s no way for anyone to know how many Bitcoins on each exchange.

Leon: For some exchanges, they can report it, but there’s no standard on the number of Bitcoin on the exchanges. That’s a big unknown.

Tai Zen: Tray Angie asks whether all these crashes are just making Bitcoin stronger and what is the real value of Bitcoin right now. The answer is yes. Watch this video earlier when I talked about how Bitcoin is developing a financial immunity towards some of these government regulations and bans and restrictions.

Next question is from Richie Rich. “Do you think Bitcoin should be traded in a mild bit? A price drop from $1060 to $950 doesn’t seem so bad.

I mean the good thing about Bitcoins is you can divide it into a hundred million units so you can trade as small as you want. You don’t necessarily have to trade a Bitcoin.

Besides, if you live outside, especially in a third-world country, I would make it a goal to own at least one Bitcoin because it can be really life-changing money for you. 1 Bitcoin can become up to $30,000 USD.

The next question is Alberto Montano. He asks:” Does the US government have the power to freeze exchanges such as Poloniex?” Yes, it does. The US government has the power to freeze any exchange in any country. A lot of people think that their jurisdictions only in the US and that’s not true. The US has lots of power and can reach out to anybody.

Let me see. “What are your price predictions on Bitcoin for 2020?”. We’ll do that in a separate video, Wilson.

This will conclude this video broadcast. Leon and I just want to make this really quick so that you guys can understand what’s going on and what the effect that the Chinese of rules and regulations have on Bitcoin and not to panic.

If you guys want to follow us some more, you welcome to follow us at on a newsletter at cryptocurrency.market/ newsletter and sign up for our newsletter because Leon does that.

I like to make videos, but Leon prefers to write a high quality of research papers that we send out to our newsletter subscribers. Make sure that you subscribe to our newsletters at cryptocurrency.market/newsletter. We look forward to seeing you in a future video.

If you guys have any friends, family or colleagues that want to learn how to invest in cryptocurrencies, make sure that you share our channel with them. We try to share with you what mistakes and the experience that we’ve learned, so you don’t make the same mistakes. Thanks for watching this video and we’ll see you in a future video.

 

 

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