The risk of a virtual currency crash over the weekend is not over yet-digital currency/blockchain

In an environment where new strains are spreading and inflation in many countries has repeatedly hit new highs, the virtual currency market is also not going well. On December 5, a reporter from Beijing Commercial Daily noticed that on December 4, various currencies, including Bitcoin, Ethereum, Binance Coin, and Dogecoin, all fell precipitously. Among them, Bitcoin has fallen by more than 20%, and some platform coins and altcoins have fallen by more than 40%, which was once close to half.

Reappearing a cliff-like fall

On December 4, the virtual currency fell off the cliff collectively. Among them, mainstream coins such as Bitcoin and Ethereum have fallen by more than 20%; platform coins such as OK coin and Binance coin have fallen by 25%; other altcoins such as Dogecoin and shit coin have fallen by more than 40%, and even more than 50%. % Or even 60%, showing that the price is cut in half.

After the rapid decline on December 4th, as of 10:40 on December 5th, the price of Bitcoin was approximately US$48,884, a drop of nearly 30% from the historical high of US$68,990. In addition, other virtual currencies continued to fall. However, as of 17:17 on December 5th, the price of virtual currency has rebounded, with Bitcoin’s latest quotation of US$48,937 and Ethereum’s quotation of US$4,177.

Regarding the reasons for the virtual currency price crash over the weekend, some analysts said that it was mainly affected by the spread of the new virus strain Omi Keron, anxiety and pessimism were obvious, inflation in many countries in Europe and the United States reached new highs, and financial institution supervision cases continued to spread from various countries, etc., directly or Indirectly promoted the collective flash collapse of virtual currencies.

At the same time, some institutions have analyzed that excessive market leverage or virtual currency flash crashes are important factors. The data tracked by Coinglass, a data site in the currency circle, shows that within an hour of the Bitcoin price crash, the liquidation of nearly $600 million in open Bitcoin futures positions was triggered. In addition, according to a report recently released by Aoshu Research, the open position of Bitcoin futures contracts has been maintained at more than 365,000 lots for more than a month. It is not common for such open positions to remain high for a long time, which may indicate the degree of market leverage. Too high.

In fact, since Bitcoin hit an all-time high on November 10, subsequent prices have generally fallen. Professor Pan Helin, executive dean and professor of the Institute of Digital Economy of Zhongnan University of Economics and Law, told reporters from Beijing Business Daily that there have been many factors contributing to the decline of virtual currencies in recent days, but the main reason is that the Fed’s monetary policy tends to tighten, and Fed Chairman Powell also gave up. The term “temporary inflation” recognizes the persistence of inflation, thus indicating that it may turn to tightening in the future. The tightening of the U.S. dollar is a blow to the belief in the world currency of virtual currencies.

“This also shows that virtual currencies have high volatility. Virtual currencies have no credit support and asset guarantees. They are private coins. Their high volatility may mean that there will be huge risks in investing in virtual currencies. Consumers must avoid such highly volatile assets. “Pan Helin said.

There are still speculators

However, when the price of virtual currency rose and fell sharply, many speculators in the currency circle regarded this as the best time to enter the market.

Li Hua (pseudonym), a witness in the currency circle, told the Beijing Business Daily that every time the industry experienced a sharp rise or fall, it was an opportunity for him to enter the market. “Because after the price has fallen sharply, I judge that there will be a chance for a rebound in the future. At this time, I will choose to buy or open long.” Li Hua said.

However, this kind of multi-air speculation game is extremely risky. For Li Hua, every time an order is opened, it is a stimulating challenge for Li Hua. Li Hua talked to a reporter from Beijing Business Daily about his recent experience of opening a leveraged contract. When he found that the market for virtual currencies such as Bitcoin and Ethereum had plummeted, he chose a platform currency to open a long operation. The bad news is exhausted and wait for a rebound.” But what I didn’t expect is that the price continued to fall. “In just 5 minutes, I almost took away my principal.”

“On another occasion, I also opened a 10-fold leveraged contract. At first I lost money, and then the price went up a bit. I didn’t expect it to be sideways for two consecutive days. I didn’t dare to sleep for two consecutive days and I was not in the mood to eat. I was full of coins, but I still lost in the end. I was really exhausted physically and mentally…” Li Hua said.

Cases like Li Hua are not uncommon. This type of contract trading, also known as futures trading, is a model of forward trading of trading products. One is to be able to go long and short, which can make two-way profits; the other is to increase leverage to gain a larger share with small gains. Hundreds or even thousands of times leverage introduced by contract trading and exchanges has made the already volatile currency market even more crazy.

Just last Friday, billionaire investor Charlie Munger emphasized the general aversion to cryptocurrencies and the gold rush it caused in the market. The 97-year-old investor stated that even in his long career, the investment environment created by cryptocurrency has reached an unprecedented extreme level.

According to contract data, as of the last 24 hours at 10 am on December 5, a total of 168,300 positions were liquidated, with a liquidation amount of up to 636 million US dollars (about 4.055 billion yuan). The liquidation amount the day before was even more tragic. According to media reports, as of 8:00 pm on December 4, a total of 417,000 people had liquidated their positions in the past 24 hours, and the virtual currency contracts on the entire network had liquidated US$2.584 billion (about 16.475 billion yuan).

In fact, the country has already stipulated that speculative currency transactions are not allowed, but with the “fuelling” of some institutions, currency people who want to speculate can still find a way to open leveraged contracts.

At present, chaos in the currency market is endless. In addition to the currency level, many people use Baidu Tieba and Telegram to exchange currency speculation, and even individual user registration agencies participate in the transaction. At the institutional level, even though a leading exchange official announced the suspension of new user registration in mainland China, There are still some open to domestic users or even pull new ones.

Recently, a person familiar with the situation revealed to a reporter from Beijing Business Daily that in recent days, many currency exchange business personnel have been pulling heads, promoting a high percentage of commission rebates in the community, and inviting friends to register to trade coins; even Exchange personnel claim to be able to teach novices to register accounts over the wall, induce novices to open accounts and even conduct leveraged transactions.

“There are currently a large number of pyramid schemes and frauds in the currency circle, even in the name of training courses or investment groups. Investors need to pay attention to such risks and be aware of fraud when handling assets.” Analysys Advanced Analysis Shi Su Xiaorui reminded that there are various problems and risks in virtual currency, and relevant supervision will continue to maintain a high pressure. It is recommended that institutions and personnel engaged in related activities put an end to fluke, and clearly recognize that such behavior is inconsistent with the policy trend, and as soon as possible Stop illegal activities of virtual currency.

The supervision of mining and trading continues to upgrade

It is worth noting that the current virtual currency market risks are accumulating. In addition to price speculation and fraudulent routines, strict control from the domestic regulatory authorities is also continuing to upgrade.

On December 3, the Hainan Provincial Development and Reform Commission issued the “Notice on Issues Concerning the Implementation of Differential Electricity Price Policy for Virtual Currency “Mining” Electricity” (hereinafter referred to as the “Notice”), and decided to list virtual currency “mining” activities as For eliminated industries, differential electricity prices are implemented, and the price increase standard is 0.8 yuan per kilowatt-hour (per kilowatt-hour of electricity).

The “Notice” proposes to strengthen the supervision of power market order, strengthen the screening of users who directly participate in power market transactions, and do not allow virtual currency “mining” users to directly participate in power market transactions in any name, and virtual currency “mining” is not allowed Users enjoy the power market concessions in any way. Virtual currency “mining” users who have directly participated in power market transactions need to withdraw within a time limit and switch to power grid companies to purchase electricity as an agent.

Regarding virtual currency transactions, in September this year, multiple departments issued a notice clarifying that virtual currency-related business activities are illegal financial activities. At the same time, it has established a full-chain supervision of virtual currency, and emphasized the development of legal currency and virtual currency exchange business, virtual currency Illegal financial activities such as exchange business between exchanges, buying and selling virtual currency as a central counterparty, and providing information intermediary and pricing services for virtual currency transactions are strictly prohibited and resolutely banned in accordance with the law.

The industry expects that follow-up supervision will also strengthen the monitoring of accounts and funds involved in virtual currency transactions, and related account blocking work will be further upgraded.

Pan Helin suggested, “Follow-up is to grasp a general principle, that is, virtual currency and domestic financial institutions must be fully decoupled; for C2C transactions, due to the decentralization and encryption characteristics of virtual currency, it is very difficult to supervise, so it is necessary to strengthen Risk education for ordinary investors”.

Beijing Commercial Daily reporter Liu Sihong