China has ramped up its war against cryptocurrencies by banning companies, businesses, and other types of institutions from offering cryptocurrency-related services.
The Asian country revealed its stance against cryptocurrencies in 2017 when it banned crypto exchanges. The latest move comes at a time when cryptocurrencies have been experiencing strong pullbacks from their all-time highs.
For example, Bitcoin hit an ATH of $64,805 on April 14. ETH, the Ethereum network’s native cryptocurrency and the second most popular cryptocurrency, reached an ATH of $4,300 on May 12. Its price has since retraced to around $2,500, while Bitcoin is now trading at just over $37,300.
What does China’s latest ban mean for the crypto community?
For starters, China is still anti-cryptocurrencies, and the latest ban means no businesses in China can legally conduct or facilitate any cryptocurrency-related business or transactions. According to a Reuters report, the prohibition extends to the financial industry, thus people in China will not be able to purchase or sell crypto using their bank accounts or credit cards.
Crypto enthusiasts in the Asian country will now find it harder to participate in the crypto market, courtesy of the expanded new rules against cryptocurrencies. However, Chinese people can still own or hold cryptocurrencies, which means that those who already have a crypto portfolio are safe. Previous bans set in 2017 outlawed Initial Coin Offerings (ICOs) and stated that the country would not recognize digital currencies as legal tender.
A recent statement from China noted that the cryptocurrency market has been highly volatile and that it has been disrupting regular economic activities while also putting people’s wealth in jeopardy.
China’s crypto ban fuels extended bearish market
The cryptocurrency market enjoyed robust gains in the past few weeks, but recent shakeups have fueled the bearish sentiments. Many retail traders have been looking for signs of the next crypto crash, thus explaining the market’s sensitivity to negative news. Cryptocurrencies were already in free-fall this week with slight signs of recovery, but the recent announcement of China’s new anti-crypto rules fueled more selling. The entire crypto market cap has tanked 20.45% to $1.68 trillion in the last 24 hours.
Understanding China’s aggressive stance against cryptocurrencies
The 2021 cryptocurrency bull market made it abundantly clear that cryptocurrencies are here to stay and that they cannot be stopped. This is a problem for the Chinese government, which imposes strict monetary control within its borders as one of its strategies for keeping people aligned with the government’s interests.
China views cryptocurrencies as a threat to its iron grip on the financial system. Some analysts think that this is the real reason why China is so anti-crypto. If people start buying into decentralized currencies, it will be easier for people to become more defiant. Chinese people are increasingly aware of the power of decentralized cryptocurrencies, and so is the government, thus its swift actions. It would also jeopardize the Chinese government’s current plan to roll out its digital yuan.
Did China’s crypto ban just trigger the next crypto market crash?
The cryptocurrency market is currently in the red due to the massive sell-off triggered by the news of China’s new crypto ban. It is difficult to ascertain whether the bears will continue dominating or whether there will be a market correction at this point. However, we know that there has been a lot of institutional participation in the market this year, which has been one reason for the strong bull run earlier this year.
The involvement of institutions may cushion the market from further decline, but more negative news may encourage more selling. Investors should be on the lookout for the type of crypto news that will come out in the next few days. If the news is positive, there will be a lot of buying now that crypto prices are discounted.
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