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More than six months has passed since China first banned Bitcoin, and more than three months since its Central Bank banned it for the second time. While merchant adoption has drastically slowed, Bitcoin is still traded actively in China.
As our source in China has pointed out, the Chinese Bitcoin market survives in an equilibrium state of being too small to be fought officially but large enough to experience some indirect pressure from the PBOC. Let me take you back to the time when my mother dusted off my high school English notebook to amuse my wife.
I was 15 years old when I wrote in it, and was conducting my first lessons in penmanship. It looked like this:. I had written various English expressions that the Chinese do not use — a way to help me learn Western thinking.
The Chinese express love in more subtle ways, such as comparing their relationship with a pair of Mandarin ducks. But I was struck with sadness when I saw this:. My note tells me that this is a line from the Disney movie, Dalmatians I am a cartoon lover.
This expression must have been impressive, or shocking, to my pubescent self, that I noted it with such care. This must be an authentic English expression, I must have thought. Chinese or Flat or Doughnut Peaches. Also called Pan Tao. Department of Agriculture via flickr. There were not enough schools for every child. There were not enough clothes for every body. There was not enough timber for every house, not enough coal for every hearth.
While the kids in the first world are watching Dalmatians with enough for every puppy, with caring and determined parents and a community of helping hands, we were watching another cartoon: He fought the heavenly army and, after fierce battles, was captured, tortured in the aforementioned fire, punished with iron pellets for meal and molten copper to drink, refusing to die for the next five hundred years.
Scarcity and suffering provided the backdrop for other Chinese cartoons, too, like Legend of the Sealed Book. We strode into the 21st century with plenty of schools, clothes, timbers and coal. However, the struggle for resources is no less fierce. Scarcity is certainly still present. Competition to enter college, the overloaded buses and the difficulties of buying a berth ticket on overnight trains constantly remind people of the need to struggle.
The government wisely promotes efficiency over fairness, boosting the economy and solving poverty along the way, and people cope with it by competing more fiercely. Any western businessman in China would admit that China is a tough market. But maybe the struggle for scarce resources is overdone. The prices are even more ridiculous when you consider that Chinese law forbids people from owning land; the real estate hoarding business is based entirely on buying and selling year lease contracts between the government and the people.
It is not just Beijing: Apparently the Ring is not desired, or even known about, by everyone, and thus does not qualify as something to be attained. A pot of tea with little, but worthwhile pieces of Agarwood, also known as oud, oodh or agar.
InterContinental Hong Kong, Licence: A given resource is hoarded, and when a tipping point is reached, usually accomplished by a signal event, it suddenly becomes popular. Perhaps the most memorable example is the garlic bubble. It started as a small bubble, but when people realised that garlic was what everyone wanted to hoard, they hoarded it too.
Reports have it that the price of garlic peaked at 30 times the pre-bubble price. This garlic is not a special onion, like the precious tulip root that was mistaken as an onion and consumed for breakfast during the Dutch tulipomania. It is the most common daily food variety.
The mung bean bubble is worth a mention too. These were both before Bitcoin. Economists ascribe these bubbles to loose monetary policies, but a similar event happened without much money being involved at all. By the late 60s and early 70s, steel-mania had taken place in China. The latest battle field, as of , is agarwood, this time occurred in the context of tight monetary policy, but this one will last much much longer.
Agarwood is a rare wood, the most precious in the world. It originates from South Asia, grows very slowly and is being traded in China for insanely high prices. People pay the price of a house to have one little stick of agarwood, not much taller than my pen. And those who want to demonstrate real wealth gather together to burn agarwood.
Not because it is a functional way to heat a room, but because it is rare the supposed function of cleansing the heart and curing every disease is not really believed.
Functionality is not an important attribute for scarce resources. So it came as no surprise to me, when the world was debating the value of Bitcoin, that the Chinese started hoarding it without much debate of its intrinsic value. The idea of intrinsic value interests nobody. Chinese people bid the price of Bitcoin up more than five-fold. Yet few of them can be categorized as libertarians.
None hate the banks and bankers. None believe our country is in the hands of bankers because it is not: People were buying and selling bitcoins, but no one actually wanted to use them. Because it is a scarce resource that others want to own, too. For my part, I like Bitcoin because I see its potential to disrupt the world of finance and destroy the financial walls around me and my countrymen. Instead, I say I have been in since What should I do other than buy Bitcoin? The Chinese are patient.
The previous rallies before September did not stir Chinese passions. They waited for a domestic signal to jump in. I published article on bitcointalk, predicting the bubble, back in October, , right after the necessary domestic signal: Now we have seen a clear domestic signal against Bitcoin. Some may argue that Bitcoin will remain a favourable investment for rich Chinese. They can always work around government restrictions, and they need a scarce resource to hoard to preserve their wealth.
Bitcoin is designed to be a scarce resource, but I think that as the ordinary Chinese get out, the rich will, too. I am inclined to think the need for a way to hide wealth from the government is a very weak reason to invest in Bitcoin. Real Estate is the top investment for all wealthy Chinese. Whether or not it is technically easy to hide the other 5 percent of their investment in garlic and Bitcoin is trivial.
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