On September 24, the Central Bank of China declared all transactions with cryptocurrencies illegal. The ban also applies to foreign exchanges providing services to Chinese citizens. How did the crypto market react to these actions and what should investors expect now?
The Chinese financial regulator announced that digital assets are not fiat currency, therefore their circulation on the market is prohibited, and all services related to them are recognized as illegal financial activities.
Taking note of the position of the Chinese central bank, the largest crypto exchanges Huobi, Binance and KuCoin banned registration for users from China. And the Alibaba corporation refused to work with cryptocurrencies, stating that it would not accept Bitcoin and other digital assets for payment. In addition, the company Bitmain, which develops mining equipment, may stop selling its equipment in China.
Mild shock on the crypto market
The statement of the Chinese central bank caused a short-term panic in the market. After this information appeared, Bitcoin quotes fell by almost 5%, and the decline in the rate of the second most popular digital currency, Ethereum, approached 8%. However, having played out this negative, within a week the quotes returned to growth. By early October, Bitcoin had risen back to $47,000 and Ethereum had risen above the psychological $3,000 mark.
Bitcoin and Ethereum price dynamics after the Bank of China announcement
Source: app.stormgain.com
What does this mean for the market?
Although crypto investors perceived the position of the Chinese central bank negatively, it was obvious that the Chinese authorities had been moving towards this decision for several years. For example, back in 2017, China banned ICOs in the country. It is worth noting that the crypto market does not depend so much on the orders of the authorities of one country. China has blocked a lot of things - for example, Facebook, Instagram, Twitter, Tumblr, Pinterest and even Tinder.
Companies working with cryptocurrencies will try to repurpose their activities so as to remain on the market in one capacity or another. For example, the digital trading platform BTCC announced that it is leaving China, but these changes will not affect its office in Hong Kong. In addition, the company will focus on developing blockchain-based applications, which will allow the exchange to remain in the Chinese market..
Market participants understand that bans from China will not destroy the cryptocurrency market. Against this background, we can expect that the impact will be short-term.
Author: Dmitry Noskov - expert at the StormGain crypto exchange (a platform for trading, exchanging and storing cryptocurrency)
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