Monday, January 24

Cryptocurrency Crackdown In China Shows Global Unrest With Asset Class

China’s declared ban on cryptocurrencies on Friday ignited a debate over whether it is part of the fight for acceptance of the unregulated asset class or something more debilitating.

A sell-off of digital currencies began after China’s central bank said that all cryptocurrency-related transactions were illegal, according to a question-and-answer statement on the People’s Bank of China website. Bitcoin, the largest digital currency, fell as much as 8.9%, while Ether lost close to 13%. The Bloomberg Galaxy Crypto Index, an indicator of some of the top cryptocurrencies, lost as much as 11%.

“It is the latest move in a multi-year crackdown on Bitcoin and cryptocurrencies,” said Antoni Trenchev, managing partner and co-founder of Nexo, a cryptocurrency lender. “For now, Bitcoin cannot take a breather. Bitcoin is being bombarded from all sides. “

Here’s how the market watchers reacted:

Chen Arad, COO of crypto risk watchdog Solidus Labs:

Although China’s move is particularly dramatic, it reflects similar concerns that regulators around the world share around the integrity of the cryptocurrency market and its role in illicit activity. Manipulation and fraud are not unique to cryptocurrencies, but as a new asset class, digital assets present new challenges and have more to prove to regulators and the public. “

Brent Donnelly, Chairman of Spectra Markets and former HSBC FX Trader:

“Solana’s summer is over, the Loot frenzy looks like a major spike for the NFT (non-fungible token) craze, El Salvador’s launch on September 7 was the ding dong high for BTC (unsurprisingly)”, wrote. “It will be interesting to see how cryptocurrencies trade in Q4 in the face of shrinking global monetary accommodation and a lack of funny stories. I guess cryptocurrencies struggle for a while. “

Steven McClurg, chief investment officer at crypto fund manager Valkyrie Investments:

“China has banned cryptocurrencies at least a dozen times this year. The volatility we are seeing today may be a knee-jerk reaction from some, but most market participants have already priced in China’s ban since early summer. “

Chris Dick, a London-based quant trader at crypto trading company B2C2:

“If the headlines are simply stronger wording ahead of China’s own digital currency, or if China is simply reiterating its stance on mining, then there is no lasting effect here,” he said. “If, on the other hand, the crackdown affects key market infrastructure, such as major exchanges, then market volatility will increase even more.”

George Monaghan, GlobalData Thematic Team Analyst:

“China ruling that cryptocurrency transactions are illegal would be disastrous for the cryptocurrency sector. Being shut out of the world’s largest market is terrible for any product, and this is the strongest demonstration yet of China’s anti-crypto sentiment, ”Monaghan said. “However, this is not the first time that China has threatened to take action and, so far, it has not complied. The next few weeks will be tough for crypto markets that were already on edge after recent SEC comments, but only actual legislation will have a long-term effect. “

Alex Tapscott, Managing Director, Digital Assets Group, Ninepoint Partners:

Veteran traders are conditioned to ignore the bad news from China and buy the dip, but could it be different this time? There are some reasons to think so ”, including China’s technological crackdown, as well as its quest for its digital yuan, among other factors.

© 2021 Bloomberg LP

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