Bitcoin

Bitcoin cocks a snook at China’s cryptocurrency ban

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China’s fiercest shot across the cryptocurrency world’s bows appears to have largely unfazed investors. Though Bitcoin and some of its rivals fell sharply on Friday after the People’s Bank of China published a statement prohibiting crypto transactions and pledging to end digital asset mining, they have now largely recovered. Bitcoin rose to near $44,000 on Monday, similar to where it stood before China’s statement. Ether surpassed the $3,100 mark set last week.

“As market participants process the information, there appears to be buying support for both Bitcoin and Ether coming online,” Fundstrat strategists wrote late Friday as the coins began to retrace their losses. “This isn’t the first time China has made such an announcement,” and if “we widen our definition of ‘ban,’ then we can pinpoint seven dates, including today when we saw some form of a crypto crackdown” from Beijing.

The action by the PBoC addressed a long-standing loophole that allowed nationals to keep accounts with offshore exchanges. It also prohibited the platforms from employing Chinese nationals in marketing, technology, and payment positions, limiting their capacity to service Chinese customers.

Despite this, many miners have already left China, which had a 46 percent share of the worldwide hash rate in April, according to the Cambridge Bitcoin Electricity Consumption Index, a measure of the computational power utilized in mining and processing.

According to Blockchain.com data, the hash rate has plummeted by more than half since the crackdowns began, from a peak in mid-May to early July. Its comeback suggests that miners have returned to China and other parts of the world. The hash rate remained relatively stable in the immediate aftermath of the Friday announcement.

The statement’s impact was felt almost immediately at Huobi, a popular offshore exchange, which stopped accepting new user registrations from mainland China phone lines. By December 31, it announced it would “gradually terminate existing mainland China user accounts.” New user registrations from the mainland were also suspended by Binance.

Huobi’s stock dropped 22% on Monday. Nonetheless, as of 9:45 a.m. London time, its coin was up 13% over the previous day, according to CoinGecko prices.

Alibaba has replied to the new laws by announcing that, in addition to the prohibition against selling virtual currencies like Bitcoin, Litecoin, and Ethereum, it will prohibit the sale of virtual currency miners. According to a statement, the categories of Blockchain Miners and Blockchain Miner Accessories will be closed on October 8.

Others may benefit as well. According to a report released on Friday by Grayscale, a digital asset management firm, decentralized finance, or Defi, or US-regulated exchanges, may be among those poised to succeed.

As trading on massive Asian exchanges ebbs due to the China ban, there’s also a chance that US-regulated platforms will gain activity.

“Should more crypto trading migrate to the United States, regulators may benefit from improved market surveillance, which would provide increased market transparency and investor safeguards in the long run,” Grayscale stated.