Last week, Chinese authorities signaled that they would begin to crack down on Bitcoin exchanges and trading activity taking place in the country.This sent the price of Bitcoin down from a near-term high of over $1,100 to below $750 as investors and traders in China scrambled to sell, some forced to liquidate positions automatically due to margin calls.The price of Bitcoin has since stabilized somewhat, now trading around $830, but due to China's influence and size of the global Bitcoin market, people are still paying attention to what the government will do next.China and Bitcoin Chinese individuals have flocked to Bitcoin, the semi-anonymous, borderless, digital currency in an effort to circumvent strict capital controls imposed by regulators, and to stave off the effects of systematic devaluations in the Chinese currency, the Yuan.China's activity in the Bitcoin market has grown such that currently more than 95% of all exchange activity is between Bitcoin and Yuan (BTC/CNY), with around 4% Bitcoin to U.S.

dollar, and the rest to currencies such as the Euro, Canadian dollar or Russian ruble.To put this in to perspective, according to Bitcoin price data aggregator, Bitcoinwisdom, over the last 24 hours, 1.2 million Bitcoin traded in exchange from CNY while just 15,250 traded for dollars.In dollar terms, that is nearly $1 billion worth of Bitcoin notional has changed hands in China and jus under $13 million in the U.S.The market cap of Bitcoin is currently just under $14 billion.ethereum coin to aud(For more, see: Is Bitcoin Being Used for Chinese Capital Flight?litecoin mining gpu vs cpu) "When China sneezes, Bitcoin catches a cold," remarked Charles Hayter, CEO of digital currency comparison website CryptoCompare.bitcoin chuck norris

The latest drop was set off by news of spot checks from Chinese regulators on local bitcoin exchanges.Indeed, bitcoin prices have spiked in the past when China has announced currency devaluations or capital control measures, and so it is not surprising that the market has operated in reverse on potential negative news.According to CNN/Money, "Finance officials inspected exchanges in Shanghai and Beijing on Wednesday to check whether they were sticking to anti-money laundering rules and other regulations, according to statements from the Chinese central bank."asic bitcoin hardware ukMeanwhile, one of the largest Chinese bitcoin exchanges, BTCC, issued a statement on the matter saying, "All operations at BTCC are normal and we continue to actively work with regulators to ensure that we remain compliant."litecoin rate calculator(See also: Could Bitcoin Surpass $2,000 in 2017?)bitcoin miner software comparison

The Bottom Line Bitcoin prices tumbled 30% from near-term highs after Chinese regulators announced inquiries into a number of bitcoin exchanges in the country.Many Chinese individuals have seen the digital currency as a safe haven against capital controls and currency devaluation.The price of bitcoin has since stabilized after much of the panic selling, and forced liquidations due to margin calls, has cleared.Want to learn how to invest?Get a free 10 week email series that will teach you how to start investing.Delivered twice a week, straight to your inbox.No thanks, I prefer not making money.BEIJING - China's central bank has sent inspection teams to three top Bitcoin exchange platforms over a possible breach of financial regulations.The Shanghai Head Office of the People's Bank of China (PBOC) said in a statement late Wednesday that it had started investigating BTCChina, the country's biggest Bitcoin trading platform, over issues ranging from money laundering to foreign currency exchange.

At the same time, two other major Bitcoin exchanges, Huobi and Okcoin, are under investigation by the PBOC's operations office in Beijing.The probes saw the virtual currency drop by over 15 percent to 5,350 yuan (about $774) per unit as of 8 pm Wednesday.The slump was echoed on overseas Bitcoin exchanges as over 90 percent of global Bitcoin trading occurs in China.Steeper declines last week saw the central bank issue warnings on the legal and technical risks of the exchanges.The web-based currency plummeted after surpassing 8,000 yuan per unit on Jan 5, when panicked investors found themselves unable to access Huobi and Okcoin transaction services.Such flucuations are reminiscent of roller-coaster prices in 2013 when the digital currency gained 900 percent before nosediving.After the heavy falls, the PBOC and finance watchdogs issued a guideline to term such currencies "digital goods" instead of legitimate currency, calling Bitcoin "risky for its role in money laundering and usage by criminals."

Zhang Wei, an associate professor with Tsinghua University, said instability was a major feature of Bitcoin and that its boom-and-bust cycles were a deadly weakness.Bitcoin, without ties to the bank or government, is underpinned by blockchain technology, a digital ledger system that uses sophisticated cryptography.It allows users to spend money anonymously, which Zhang said was more of a defect than a merit, adding that anonymity made the digital currency a handy tool in money laundering and capital flight.With its help, investors are able to buy with Chinese yuan and sell for US dollars, effectively bypassing the annual forex quota of $50,000.Financial critic Ye Tan said that leveraged funds worth billions of yuan could be channeled into foreign exchange trade via the virtual currency.Previous rallies in the Bitcoin price came as the Chinese yuan depreciated about 7 percent against the surging dollar in 2016 amid concerns of more US interest rate hikes and capital outflows.The PBOC has prohibited Huobi and Okcoin from mentioning depreciation of the yuan in their advertizements, as the yuan started the new year with a big jump, surprising the market with a strong performance.

The central parity rate of the yuan gained a hefty 639 basis points against the US dollar on Jan 6 to reach 6.8668, the biggest single-day increase since 2005, according to the China Foreign Exchange Trade System.Meanwhile, China is still home to the world's largest forex reserve and enjoys forex inflows from its trade surplus and foreign direct investment of about $620 billion each year.Ye said the latest probes had sent a clear warning signal and checked the possibility of money laundering.Despite the warnings, digital currency has it merits, using sophisticated cryptographic techniques, costing less to circulate, improving transaction efficiency and boosting transparency.After floating the plan in 2014, China is accelerating research into its official digital currency, which will be issued by the central bank and be backed by the government.It will initially introduce the currency in certain money markets and promote its use in a gradual and cautious way, according to a PBOC official leading the research efforts.