The cryptocurrency ecosystem was once again thrown into a state of chaos due to news coming from China. The same country is already inside of its crackdown on cryptocurrency mining, but now an additional element came into the picture which is just as worrying. That includes an order from the Peoples Bank of China or PBoC, which states that all crypto-related transactions should be stopped immediately. For many in the same domain all across the world, the news boils down to the nightmare scenario of strong and decisive regulatory action on the behalf of a major country and against the cryptocurrency markets.
This naturally triggered a massive sell-off and drop-in crypto prices which continues to generate further worry and insecurity. When the fact that crypto markets are not in great shape regardless of the same development is taken into consideration, it is clear that the outlook for the second half of 2021 does not look right. The same applies to bitcoin as the biggest network for digital currency in the world, just as much as to any other alternative cryptocurrency network currently in operation.
The start of this week has been incredibly bad for bitcoin, even by the standards of the recent settling down of the crypto markets. On Monday alone, the cryptocurrency network went down nearly 10 percent, followed by an equally troubling Tuesday. During that day of trading, the BTC token fell below 30,000 USD, showing that even this resilient marker did not stand a chance under the current pressures to sell. All of that shows a strong level of volatility that is shaking the crypto markets and there is no sign that things are calming down. A lot of that movement is fueled by the news coming from China and the way it is rattling the traders and investors.
Because of this, the biggest cryptocurrency in the world, which has long had issues with volatility, lost over 20 percent in the previous week. It is down 50 percent from its peak in April when it reached nearly 65,000 USD. In 2021, it has still gained over 10 percent, though. However, despite the complex calculation, it appears that the trajectory of this cryptocurrency, just like one of the broader markets, is pointing straight down. The fact that the PBoC is currently stopping all crypto-associated transactions is only hammering an additional nail in a box that was growing around bitcoin. While it is still unclear how this blockade on all crypto transactions will look like, the fallout is undeniable. In an age where social media and esports hold more power than traditional news outlets or sports, the development is quickly causing fires in the public consciousness.
The drop in the markets comes as a growing crackdown on all manner of cryptocurrency activity takes place in China. This huge country is famous for its big contribution to the hashing power of the entire bitcoin market, as well as other digital currencies. This means that the mining farms in China allow bitcoin, ethereum, and other networks to keep working. Now, the same farms are under pressure to close, which is coming directly from the authorities. In the province of Sichuan, in the southwest of the country, the local government ordered all bitcoin mining projects to stop their operations.
The province is a massive producer of hashing power and thus new bitcoin blocks, which is a crucial element for the support of the bitcoin network. Yet, the dramatic nature of this development which is being presented in the global media is not wholly deserved. This is no news on the global plan inside of China. The government has been antagonistic towards cryptocurrency for some time and even last month, the State Council stated that it is planning to clamp down further on crypto mining as well as crypto trading. All of that comes as a broader package designed to control financial dangers and risks that the authorities associate with digital currencies.
Data and Mining
It is hard to attain precise data on the bitcoin network operations. However, there are some valid information sources showing that China accounts for 65 percent of global bitcoin network support. In the country, Sichuan is the second-biggest producer of its hashing power. Here, like in any other place where crypto mines operate, companies behind these ventures usually hold large stocks of cryptocurrency, which they attain as a reward for their activities.
When they move to sell parts of these inventories, the prices usually fall as the result of an increase in access to BTC tokens (or any other token for that matter). Presently, analysts believe that many are doing just that – offloading their possessions of digital currency and thus taking the already weakened market to even lower points.
The PBoC ban on crypto activity did come with some additional movement in the Chinese banking sector. On Monday, the same central bank summoned other payment institutions and banks, telling them to do the same and crack down immediately on cryptocurrency trading. The institutions that answered the call of the PBoC include the Agricultural Bank of China, which is the third-largest asset lender in the country. It agreed to the PBoC suggestion and began conducting due diligence on all of its clients with the aim of rooting out any illegal activities that include some form of crypto transaction and trading.
In general, this means that while many financial institutions were well aware of the crypto transactions and trading that took place on their systems. Now, they will be moving likely in synch to try and stop it all. The repercussions for all of this are yet unclear, just like the mechanisms of control of these transactions. But, it is hard to imagine a scenario where the same does not have an immediate and drastic continued fallout for the crypto prices. The same scenario, to make things worse, is already piggybacking on a generally negative climate for cryptocurrencies.