Virtual currencies reproduce the collective "flash crash" bubble narrative that urgently needs regulatory correction

The bubble narrative of virtual currencies urgently needs to be corrected by regulation

Zhang Jingwei

At noon on December 4, the virtual currency reproduced the collective "flash crash", and Bitcoin surged by $10,000 in the afternoon, a 24-hour decline of more than 20%. According to the Securities Times, the latest data shows that in the past 24 hours, a total of 417,000 people have exploded, and the amount of digital currency contracts has reached 2.584 billion US dollars (about 16.4 billion yuan). Among them, the amount of Bitcoin blowout in 24 hours alone exceeded $1 billion. Virtual currency this year can be called "unfavorable year", the sharp decline has been many times.

Virtual currency is a game of technology masters and capital tycoons, which has become a carrier of speculation and speculation, triggering the gathering of speculators. It can be seen that the lack of vague space for supervision, the technological label and algorithm advantages of virtual currencies have become a gimmick that speculators have trumpeted. The bubble narrative of virtual currency is not only a virtual capital game - the carnival of individual capital bosses who break through the existing regulations and the tragedy of most followers, but also consumes a lot of power resources. The unique algorithm of virtual currencies requires a lot of power resources. The data shows that the world consumes 134 billion kWh of electricity on the "mining" of virtual currencies. For every Bitcoin "produced", the energy consumed is equivalent to the electricity consumption of a family of three for a year.

The barbaric growth of virtual currencies will form a more difficult capital aggregation and speculation effect in the network virtual space. When capital falls into the virtual currency game and ordinary people are keen to hype virtual currency, the entire system of the real world will be unshakable. When the international community pays more attention to climate change and new energy, the behavior of virtual currencies that consume a lot of electricity resources has also made virtual currencies infamous. The more unregulated financial products have unpredictable labels, the more they can form a hype effect and the greater the risk of aggregation.

The reasons for this virtual currency crash are manifold. Market panic caused by the arrival of the Olmirkron strain has hit the three major US stock markets, and other stock markets around the world have also been affected. Virtual currencies involved in speculative markets are naturally also affected by the transmission of market panic. The valuation of virtual currency was too high, and the decline was naturally large. The trend of the Fed turning hawkish has also affected the virtual currency market.

More importantly, the world has begun to focus on the regulation of virtual currencies, and a consensus to curb the barbaric speculation of virtual currencies is forming. Virtual currencies have a long time across the virtual world, and repeatedly create bubble narratives, coupled with high energy mining behavior, have made the global central bank in the epidemic era intolerable. If measures are not taken to strengthen supervision, virtual currencies will become wild horses that will be out of control, bringing systemic risks to the existing financial system. Moreover, global central banks will not agree to let the technology and capital giants unite to form an emerging force that is difficult to control.

Since the beginning of this year, from the G7 (Group of Seven) to the G20 (Group of Twenty) to major countries, there has been a global consensus on increasing the supervision of digital currencies. From advanced economies to emerging markets, rules for incorporating virtual currencies into existing regulatory systems are being discussed while regulating existing virtual currency markets.

On September 4, 2017, Seven departments, including the People's Bank Chinese of China and the Cyberspace Administration of China, issued the Announcement on Preventing The Risks of Token Issuance and Financing. On September 24 this year, Chinese Bank and ten other departments jointly issued the "Notice on Further Preventing and Handling the Risk of Speculation in Virtual Currency Transactions", emphasizing that virtual currency-related business activities are illegal financial activities, and overseas virtual currency exchanges providing services to residents in China through the Internet are also illegal financial activities. On the same day, the National Development and Reform Commission and other eleven departments jointly issued the "Notice on Rectifying the "Mining" Activities of Virtual Currency", and the whole chain comprehensively rectified the pattern of "speculation". While strictly supervising and blocking the partial door, the digital yuan has also opened up multi-scenario applications.

It can be seen that putting on the tight curse of orderly supervision of virtual currencies will promote the butterfly update of digital currencies.

Source: Beijing Youth Daily