Yesterday, China Central Television broadcasted a news report that highlighted the dangers of investing in cryptocurrency or cryptocurrency related offerings on a news report on prime time, trough the example of the woes of a single cryptocurrency investor. This according to a report of CBNE.
China Central Television, most known by its acronym CCTV, is the major state television broadcaster and producer in all of China. It is comprised of more than 50 thematic channels, ranging from sports to a 24-hour news channel. The news program, called “Xinwen Lianbo”, is one of the most watched worldwide having a great influence over Chinese people’s opinion.
The broadcasted report, called “Blockchain Cryptocurrency Bubble Accumulates” deals with the misadventures of a cryptocurrency trader called Yang Chao, who has lost a significant amount of money investing on cryptocurrencies. The report states that the volatility in the market makes possible that novice investors gamble all his money trying to win high. But cryptocurrency prices are unpredictable, as some have learned the hard way.
It also criticises the possibility of pump and dump schemes within the creation of new cryptocurrencies stating:
“BECAUSE COUNTRIES LACK EFFECTIVE REGULATION, CAPITAL CAN USE THE GAME OF RISING AND FALLING PRICES TO READILY MAKE OFF WITH THE FUNDS OF SMALL INVESTORS. THESE TYPES OF OPERATIONS ARE EASY TO DO ON THE CURRENT MARKET WHERE THERE ARE A LARGE VOLUME OF NEW CRYPTOCURRENCY ISSUES.
Pump and Dump schemes occur when coin creators or buyers make prices skyrocket through increased demand and then sell at high profits, leaving other investors with great losses. As the article says, those are better executed with new cryptocurrencies with a limited market cap because it is easier to manipulate its demand.
The report finishes stating:
“THE LACK OF OPENNESS, THE LACK OF TRANSPARENCY, THE INSTABILITY OF PRICES, AS WELL AS THE EXPECTATION AMONGST INVESTORS THAT THEY WILL BECOME RICH OVERNIGHT, HAS MAGNIFIED RISK ON THE VIRTUAL CURRENCY MARKET.”
This means that the real problem with the market is not cryptocurrencies, but traders that ignoring the real state of the market and its volatility, and not having an understanding of what trading is, try to get rich investing (and, most likely losing) big sums of money. China has always had a hostile stance on cryptocurrencies, but that has been inefficient to thwart the interest of the people in them.