Bitcoin experienced a topsy-turvy time for the last two weeks as the currency saw its price fall by 40% to $2,951 following a ban in Initial Coin Offerings (ICOs) and trading exchanges in China by the Chinese government.
China is known for its hard stance on Bitcoin and other cryptocurrencies. The country has clamped down on Bitcoin a good number of times in the past with devastating results.
However, observations show that the Chinese impact on Bitcoin price is dwindling along with its market share.
A major chunk of Bitcoin transactions was done in the Chinese Yuan, and China was the biggest shareholder.
As a result, the market would sway heavily due to happenings in China. In 2013, Bitcoin lost more than 50% of its price overnight after the Chinese government abruptly instructed exchanges to stop trading.
At the moment though, China has fallen to fourth place on the log with just 7.26% of Bitcoin transactions done in Yuan. There are reports that most Chinese investors turned to Japan following the crackdown on the crypto-coin by the Chinese authorities. Japan is now the biggest Bitcoin shareholder, enjoying 45% of the market, CryptoCompare says. The United States is next with 31% and then Korea with 7.5% of the market share.
So, when China launched another crackdown on bitcoin, veterans dismissed the fall in price as a temporary thing. Crypto Compare CEO Charles Hayter,said the Chinese crackdown is not enough to crash the market as China accounts for less than 20 percent of the market.
On Friday, Bitcoin started appreciating again after hitting a low of $2,951. It kept rising during the weekend and on Monday rose above $4,000. This points to the fact that investors had reacted to the news coming out of China by selling their Bitcoin in panic. This panic was aggravated by JP Morgan CEO James Dimon's allegation that Bitcoin is a fraud and could be likened to the tulip bubble and would eventually burst.
However, the Bitcoin market is recovering. This is because investors are getting over the initial shock and realizing that China no longer dominates the market, according to analysts.
Aurelien Menant, the founder and CEO of Hong Kong-based token exchange, Gatecoin buttresses this point.
"The market realizes that it doesn't matter what happens in China anymore, the exchanges based there no longer dominate trading activity and more mature liquidity from institutional players in Japan, Korea and Europe is providing a boost to this next bull cycle," he said in an email to CNBC.
"It's also important to remember that the crackdown in China was targeting the activities of the local exchanges for not complying with the Chinese financial regulatory environment and not a crackdown on Bitcoin and blockchain technologies", he added.
What is the future price of bitcoin?
Market confidence seems to be returning to Bitcoin as many expect it to consolidate on its gains. It is noteworthy to say that the price action witnessed over the weekend is similar to the conditions seen in mid-July when the crypto-currency hit a big low and then rebounded. At that time, the market saw a huge breakout, followed by a bullish reversal which propelled it to a record high of $5,000.
If Bitcoin ends on a positive note on Tuesday, let's say above $5,440 (which is a 50-day moving average), you can expect another bullish reversal which could push it to a new record high.
Wall Street analyst Tom Lee believes Bitcoin will see some ups and downs in the future but believes the crypto-coin would hit $25,000 in three years.
Only time will tell.