- China’s sustained cryptocurrency crackdown has been intensified in recent months, sparking a major FUD amongst investors.
- A closer look into the details reveal that the crypto market is choosing to ignore the unsavory headlines from the most populous country in the world.
- Increasing miner migration and new developments have triggered renewed optimism for investors.
China occupies the center stage in cryptocurrencies with its large and digital-savvy population. At the heights of its powers, China contributed the most to Bitcoin’s global hashrate thanks to the majority of miners being domiciled in the country. Despite its enviable position, Chinese authorities have launched a major attack against cryptocurrencies that have sent the Chinese crypto scene spiraling out of control.
China’s Anti-Crypto Sentiments
China mines the most Bitcoin, contributing over 50% of the hashrate and tops the chart in the mining of other cryptocurrencies. With a population of over 1.4 billion people and several founders in the crypto space sharing a Chinese heritage, the country’s impact on cryptocurrency is profound.
However, things began to fall apart after authorities renewed their efforts to clamp down on cryptocurrencies and allied activities. Things came to a head in May when the government precluded banks and other financial institutions from facilitating cryptocurrency transactions. Raids were carried out and arrests were made, striking panic in the heart of investors as almost $1 trillion was wiped from the markets. Bitcoin fell from an all-time high of $64,000 to lows of $30K amid dwindling hash rates.
Mining activity was also brought to a grinding halt following the decision of provincial governments in Xinjiang and Sichuan to shut down mining hubs leading to a decline in demand for mining GPUs. In an attempt to put the final nail on the coffin, China accelerated the development of the digital yuan to offer a centralized alternative to cryptocurrencies.
The Markets Remain Unfazed
Months after the Chinese fuelled FUD, the cryptocurrency markets have climbed above $2 trillion in defiance of the crackdown. The migration of miners from China to other favorable regions saw hash rates begin their recovery, slowly reducing the influence that it wields over the markets.
Some analysts have pointed out that the antics of regulators are all bark and no bite. Chinese citizens were still able to trade cryptocurrencies with exchanges based outside China after the ban. The decentralized and anonymous nature of cryptocurrencies makes it easy for transactions to still be carried out, encouraging continued transactions.
After months of uneventful sideways trading, prices spiked fuelled by institutional investors pouring in while the prospect of developing countries like El Salvador and Cuba accepting bitcoin as legal tender sends a strong signal. Furthermore, the possibility of Bitcoin ETFs and growing crypto acceptance rates in the face of the Chinese anti-crypto stance indicates that the market remains unfazed.
Why It Matters
China has a long, storied history of hounding the crypto industry which creates doubt and uncertainty amongst investors. Cryptocurrencies and blockchain technology are hinged on the tenets of decentralization and the ideal conditions should be one free from the whims and caprices of one entity. However, given China’s impact on the markets, investors should still keep tabs on the moves of its regulators.