On Friday, bitcoin and ethereum fell into the red amid concerns over China’s economy.
According to Coin Metrics data, bitcoin’s price fell 6% to $42,081. Ethereum, the second-largest digital currency, dropped 10% to $2,834.
The People’s Bank of China has just said that all crypto-related activities are banned. The PBOC has stated that services offering trading, order matching, or derivatives for cryptocurrencies are expressly forbidden. Exchanges in countries other than China are also prohibited, according to the central bank.
Beijing has been cracking down on cryptocurrency in a big way this year. The Chinese government attempted to eliminate bitcoin mining, the energy-intensive process that confirms transactions and creates new coins. As a result, bitcoin’s processing power dropped precipitously as miners switched off their computers.
The People’s Bank of China prohibited banks and non-bank payment firms like Alibaba affiliate Ant Group from operating in the field of virtual currency. In July, city officials ordered a Beijing-based software firm to cease operations after it was discovered to be involved with crypto trading.
Though China’s position on crypto had not changed, it was enough to send the market into a tailspin, according to Vijay Ayyar, head of Asia Pacific at digital currency exchange Luno. The growing tension between investors and regulators in the US has already frightened them away.
“The Chinese authorities have always been inflexible in their opinions, and these remarks aren’t new,” Ayyar added. “They’ve said similar things before. But the reaction is intriguing because we’re already in a slightly nervous environment for cryptocurrency thanks to recent SEC comments and the overall macro situation with Evergrande’s news.
Overall, we’ve seen this happen many times in the past, with such dips being unnatural and quickly bought up, especially in a bull market cycle. As long as we don’t fall beneath $38,000 on a high time frame basis, we remain in positive territory price action-wise.