Cryptocurrency prices plummeted overnight as China tightened its grip on the digital currency. According to CoinMarketCap, Bitcoin (BTC) declined 9% after the announcement, while Ethereum (ETH) fell around 12%. Both positions improved somewhat as U.S. dealers entered the market this morning.
For quite some time, China has been seeking more severe measures against the bitcoin industry. In May, Bitcoin services were rendered illegal in China, causing values to plummet. On the other hand, some Chinese traders have continued to use international bitcoin exchanges. This is one of the challenges that the new measures will address.
China’s latest crackdown on cryptocurrency
China’s central bank and other government agencies have taken the country’s toughest anti-crypto measures to date. Separately, the National Development and Reform Commission, the country’s planning department, has increased its efforts to curb cryptocurrency mining. The following is a brief summary of the country’s new strategies:
From token issuance through trading and derivatives, all cryptocurrency transactions were designated as illegal and completely prohibited.
He declared overseas bitcoin exchanges to be unlawful, as well as the services they provide.
He convened an interagency working group to enact anti-cryptocurrency legislation.
This made it easier to keep track on virtual currency activity.
He put in place procedures to shut down websites and limit payment options.
To help the country fulfill its carbon neutrality targets, he asked local authorities to take action against unlawful bitcoin mining.
Local governments must monitor unusual electricity use and refrain from aiding mining firms in any way.
Bitcoin and other cryptocurrencies, according to the joint statement, undermine financial order and facilitate money laundering, fraud, and pyramid schemes. Bitcoin speculation, according to the theory, destabilizes the economy and jeopardizes societal stability.
Another possibility for the recent adjustments is that China is currently experimenting with its own digital yuan. The Bank of England’s Central Bank Digital Currency (CBDC), often known as GovCoin, is a digital currency developed by the Bank of England. It’s built on blockchain technology and has many of the same advantages of cryptocurrencies, including as rapid and low-cost transactions. It is, however, centralized, which means that it is controlled and supported by the Chinese government.
Small toy figurines are depicted on representations of the Bitcoin virtual money shown in front of an image of China’s flag in this illustration photo taken on April 9, 2019. REUTERS/Dado Ruvic illustration
Is there a need for investors to be worried?
China’s latest measures are not out of the ordinary. Closing the loophole that permits Chinese traders to use foreign services, on the other hand, will almost certainly have a short-term impact on the economy.
As a result of the crackdown in May, the price of bitcoin has nearly half in a few months. We’re probably in a similar scenario right now: prices are hitting new highs, prompting analysts to warn that the market has reached unsustainable levels.
However, there are a few distinctions to be made. For starters, China’s earlier regulation initiatives have rattled the cryptocurrency industry, prompting many bitcoin miners to relocate to nations that are more cryptocurrency-friendly. Furthermore, many new areas are moving away from coal and toward renewable energy, reducing Bitcoin’s carbon impact.
The second major distinction is that the United States may be planning its own cryptocurrency crackdown. In the United States, increased regulation will almost surely have a negative short-term impact on pricing, while excessive regulation may have a long-term impact. This morning, cryptocurrency prices had climbed somewhat. On the other hand, the double punch of anti-crypto actions in the US and China may result in a market crash.
Finally, practically every week brings news of bitcoin’s growing public acceptance, which may provide some respite to investors. AMC Theaters, for example, has stated that before the end of the year, it will take a number of digital currencies. Twitter just added a bitcoin tip feature a few days ago. Furthermore, several cryptocurrencies are making headway on key technology challenges that could stymie the sector’s growth.
Keep a long-term perspective
These larger and more advantageous actions, which are required to properly use blockchain technology, may thrill you if you are investing for the long term. Our financial services and other companies have already begun to evolve, but there is still much to be done.
You should only invest what you can afford to lose because bitcoin is still a very new and unproven enterprise. You won’t feel pressured to sell on market failures if you do it this way, and you’ll have more time to wait for the market to recover. Because we have a long-term objective, we can overlook short-term setbacks like China’s recent actions.