I was wondering if
Bobby Lee is correct about how the average Chinese exchange operates, and his observations do seem to be valid explanations of odd marketreactions in China, how can you still make any kind of usable market prediction considering all that fraud. To name a few, he lists, exchanges padding volumes with zeros, selling to itself, repeating past sales to hide low activity and phantom liquidity (via fake buy and sell orders that cause flash crashes when someones marketorder falls right through them), add to that zero fees and you've got a rather explosive mix, that's more destructive than helpful to the market.
If you consider this, then I'm having a real hard time seeing what is supposed to be so bad about the news that China is banning exchanges. If what Bobby says is even a little true, then the ban can't come soon enough in my opinion, in the mean time it might be a good idea for the market to completely disregard any market prices from China, because it looks like they do not have even remotely the marketshare or volume that everyone seems to believe they have and therefore should not have the same impact on marketprice either.
I think this is a good point. Data providers should be advised of it. Bitcoinwisdom, bitcoincharts, bitcoinity, etc. The case is something like this:
(1) Once, it was important to add Chinese data, because it was a large and growing free market.
(2) The facts have changed, and like Mt.Gox before them, the Chinese markets are no longer free, nor growing.
(3) The Chinese data is now tainted. Propagating it hurts the Bitcoin economy and the users of your service.
Tainted might be to nice a word for what's going on, we're talking faked numbers that are off by multiple factors of 10. I'd like to know where the current 10% CNY BTC-marketshare numbers are coming from, because if you can divide that number through 10 then what remains of the total volume then?
I'm starting to believe that the Chinese stake in the bitcoinmarket has been severely overestimated and even more damaging than the whole m-t-Gox fiasco. It might indeed be advisable to just scrap the Chinese exchanges from all charts until it can be proven that they are trustworthy enough to be listed. It's one thing if it's a local joke that a few Chinese are into, but I don't see why the rest of the world should play along with that little game then.
It's very refreshing to see a few people openly acknowledging something that I have been thinking about myself since November. With the exception of BTC China which may be on the level (for now Bobby Lee seems to be an upstanding guy, at least until proven otherwise), my fear is that the other Chinese exchanges are masking a world of fraud. Fraud in the Chinese culture is not as frowned upon as it is in the U.S. and other countries, because they don't see it the same way... over there it is survival of the fittest, so many there would be willing to "bend the rules" if it gives them an edge. Things that we found to be completely outrageous and unacceptable with Mt Gox, such as running a Ponzi, cooking the books, likely inflating BTC prices and volume levels, etc. might be seen in China as "business as usual", since there is no regulation to stipulate that they have to do anything on the level.
So what happens if it's proven that they are all inflating prices and volumes, running Ponzi's with phantom BTC, etc.? What then, another extreme crash? The more time that passes, the more extreme such a crash could be. And more importantly, why should the rest of the world's bitcoin exchanges trust them enough to follow their price patterns? Why should we allow them to pull the rest of the world's exchanges down? Until someone credible is allowed to go in and audit the Chinese exchanges, I'll always remain dubious. I guess the same could be said of having suspicions of Bitstamp and BTC-e, but I'm more inclined to trust a Bitstamp or a Kraken at this point than I am BTC-e or any of the Chinese exchanges.