Jason Lin
After China banned banks and payment firms from providing services related to crypto-currency transactions, Bitcoin tumbled as much as 30% to a low of $30,101 on Wednesday morning. Meanwhile, other digital currencies such as Ether, which acts as the fuel for the Ethereum blockchain network, and Dogecoin lost as much as 22% and 24% respectively.
Nevertheless, Bitcoin and other cryptocurrencies bounced back within 24 hours, recovering some of yesterday’s losses. For example, Bitcoin flirted with the $40,000 level on Thursday, according to Coindesk.
The fresh crackdown may make it harder for individuals to buy cryptocurrencies, and the fears of regulatory crackdown could impact miners’ business by making it more difficult for them to exchange cryptocurrencies for yuan, but it won’t stop crypto speculation.
In September 2017, China banned Initial Coin Offerings (ICOs) in a bid to protect investors and curb financial risks. The ICO rules also banned cryptocurrency trading platforms from converting legal tender into cryptocurrencies and vice versa. The restrictions prompted most such trading platforms to shut down with many moving offshore. At that time, crypto prices dropped significantly and the panic spread for a while, but then Bitcoin price skyrocketed to a record high at nearly $20,000.
Until now, even after Wednesday’s crackdown, Chinese investors can still trade on platforms owned by Chinese exchanges that relocated overseas. Meanwhile, China’s OTC market for cryptocurrencies still works well. It is because banks and payments companies face challenges in identifying money flows related to cryptocurrencies. The peer-to-peer deals in the OTC market make those transactions look like normal transactions between individuals. To shut down cryptocurrency, you will have to shut down the internet. Otherwise, it just moves elsewhere.
The drastic drop in Cryptocurrencies was not simply caused by China’s regulation crackdown, it began last week when Tesla’s (NASDAQ: TSLA) Elon Mask announced not to accept the digital currency as payment for cars, a reversal from an earlier announcement.
The Cryptocurrencies market is more volatile and emotional, in other words, more highly speculative, but younger generation investors are more risk-seeking and easier to adapt to those innovations, no matter in China or the US, or anywhere else.
Coinbase (NASDAQ: COIN) Q1 earnings report shows how crazy it is in the cryptocurrency market: the company had 56 million verified users, up from 34 million a year earlier. Active users rose to 6.1 million from 1.3 million.
Except for China, US Treasury Department announced today that it will require any transfer worth $10,000 or more to be reported to the IRS. There would be and should be more regulation on cryptocurrencies this year, but the trend of accepting cryptocurrencies is unstoppable.
