In what must feel like Groundhog Day for experienced crypto investors, old news from China resulted in a fresh price drop in bitcoin prices.
China just loves banning bitcoin
A memo from China’s central bank, the People’s Bank of China (PBoC), kicked off a $2,000 price drop within hours last week. Interestingly, the memo itself had been around since September 15 but was not circulated until September 24. When it did, markets reacted to its content: criminalising practically all cryptocurrency activity except possession.
However, this was far from the first time Chinese officials circulated news resembling a ban on cryptocurrency. China “banning” bitcoin has turned into a running joke in the crypto space by now, with sources counting up to 19 different occasions of bitcoin bans by the authoritarian regime.
Bitcoin OG’s just shrugging it off
While markets displayed the usual short-term volatility in response to negative news, experienced key opinion leaders in the space were less than impressed. “This has to be the 20th time that China has banned bitcoin,” said Meltem Demirors, chief strategy officer at CoinShare. She continued that while the “bans” always differed slightly, they were never really dramatic in the larger scheme of things.
“It should surprise no one that China doesn’t like bitcoin. It is the pure antithesis of their regime of top-down centralised currency control,” according to Chris Bendiksen, head of research at CoinShares. Indeed, China had already “banned bitcoin” earlier this year by announcing measures to restrict mining rigs and ban financial institutions from providing crypto-related services. The latest measure just seems to be more of the same, making the nervous reactions by markets all the more surprising.
How it could impact markets going forward
When it comes to China banning bitcoin, the markets have displayed a curiously stable pattern of selling off in the short term but rising in the long term. That would, of course, implicate the news is nothing but noise among increasing mass adoption of the most popular cryptocurrency.
However, regulation from U.S. financial authorities might put further long-term price gains on pause. Gary Gensler, SEC chairman and outspoken crypto critic, has been working hard to regulate Bitcoin and other cryptocurrencies. Much to the dismay of crypto bulls, Federal Reserve Chairman Jerome Powell and U.S. Treasury Secretary Janet Yellen seem equally unwilling to give free rein to Bitcoin.
Regulators might be taking a risk by banning an upcoming technological change, according to industry experts:
“Taking reasonable, well-considered measures is a huge opportunity for the U.S. to be a haven for the future of crypto, and entrench itself as a hub for the global economy in the decades ahead,” said John Wu, president of Ava Labs, another layer one blockchain. “Just as we’ve seen with bitcoin miners fleeing China and heading to the U.S. in states like Texas and Wyoming, crypto start-ups will flood to crypto-friendly states and countries.”
This, of course, should also be a warning shot to countries like Australia, which have been sorely lacking the sort of communicative approach the industry would want regulators to have.