The regulatory crackdown by China has again pushed the markets down. It is the fourth such decree this year.
The price of Bitcoin dropped 5% amidst negative news coming from China about banning all crypto-related activities.
China’s Association with Crypto Market Prices
Historically, the Bitcoin network’s hash rate and its price have been linked to Chinese miners because of their dominance. Over the years the Chinese government has cracked down on cryptocurrencies, repeatedly creating Fear, Uncertainty, Doubt (FUD) in the market.
Since 2009, China has been expressing its anti-crypto stance. That year saw China’s Ministry of Culture and Ministry of Commerce banning the use of “virtual currency” to pay for real-world goods.
In subsequent years, the country made many announcements discouraging people from the crypto industry which in turn has negatively affected the crypto market.
However, since Bitcoin is decentralized, it always roars back and starts gaining in value after a temporary plunge once a FUD spreading news dissipates.
China’s Crypto Ban in 2021
This year China has reiterated its anti-crypto stance several times.
It began with the Government questioning mining farms about their alarming carbon footprint.
Later, the country became skeptical of private virtual currencies.
Discussed below are the top FUDs spread by the Chinese crackdown this year.
- On May 18, the National Internet Finance Association of China, the China Banking Association, and the China Payment and Clearing Association released a statement cautioning investors of the volatility of cryptocurrencies and dissuaded them from investing in crypto.
The very next day, the infamous crash of May 19 took place, which brought Bitcoin to USD 30,000 at one point from USD 42,000.
The month of May also saw an increasing crackdown on Bitcoin mining in the Inner Mongolia province of the country.
- June was no different. The People’s Bank of China (PBOC), the country’s central bank, on June 21 directed banks and payment service providers to “not provide account opening, registration, and registration for (crypto) related activities.”
That day too, Bitcoin fell from USD 35,000 to USD 30,000. But, it kept on resurging steadily.
Furthermore, social media websites in China banned crypto-related accounts and content on their platforms.
- June also saw a crypto mining ban by various provinces of the country; PBOC combined with local authorities to enforce the ban on crypto mining.
The local bans brought 2 weeks of bullish rally to an end when Bitcoin crashed nearly every day for a week from June 15 to June 22. The price dropped from USD 40,000 on June 15 to USD 31000 on June 22.
- Yesterday, the PBOC decreed all cryptocurrency transactions as illegal and said that several departments are working to “cut off payment channels, dispose of relevant websites and mobile applications in accordance with the law.”
The policies “prohibit financial institutions from developing and participating in virtual currency-related businesses, and clean up and ban domestic virtual currency transactions and token issuance financing”, a rough translation of the statement reads.
The news dropped bitcoin to USD 40,000 from USD 44,000.
The crypto market responds to the news, whether negative or positive. However, after a while, it tends to return to its regular trends. Hence it is safe to assume that every news has a transient effect on the market.
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