Bitcoin falls further as China cracks down on crypto-currencies
I ended a piece in which I compared the cryptocurrency with 17th-Century Dutch tulips or London houses in the 1980s with this thought: “Unless and until Bitcoin can be used to buy a sandwich, or be accepted by your friends when you pay them back for a restaurant meal, then it is likely to remain just a playground for geeks and gamblers.”
China crypto players shrug off Beijing’s latest crackdown
SHANGHAI — China’s latest salvo against cryptocurrencies has driven a brutal selloff in bitcoin markets but retail traders, miners and even crypto finance firms reckon Beijing’s bark is louder than its bite.
China’s announcement on Tuesday of a tougher ban on banks and payment companies offering crypto-related services furthered a selloff that briefly wiped $1 trillion off crypto market capitalization.
But fears that the rules would cripple cryptocurrency markets and mining on the Chinese mainland appear baseless. Cryptocurrencies could still be bought from China on Thursday and investment schemes promising juicy returns for mining them remained operational.
Bobby Lee, founder and CEO of Ballet, a cryptocurrency wallet app, said he thought the announcement was merely an attempt by regulators to protect retail investors from volatile markets, but that it would be a challenge for banks to identify crypto-related dealings.
“If you look at the banking activity in China, millions or maybe billions of transactions happen on a daily basis. From all that … how many are actually really crypto services versus dining or e-commerce? It’s almost unknowable,” said Lee, formerly CEO of BTC China, China’s first bitcoin exchange.
It’s not the first time China has banned crypto-related financial and payment services. Beijing issued similar bans in 2013, and in 2017, though the latest one has expanded the range of prohibited services. The repeated bans highlight the challenge of closing the loopholes.
On Thursday, Reuters found it was still possible for Chinese individuals to buy bitcoin and other cryptocurrencies and trade them on overseas crypto exchanges such as Binance. Yuan payments for these purchases could be made via banks or commonly-used online payment platforms in over-the-counter (OTC) markets.
“If you have bitcoin or ethereum, and I want to buy some, I can just send money to you through banks. Just don’t write down anything like bitcoin or ethereum,” said Mr Li, who sells cryptocurrencies on behalf of miners.
“Of course, banks have internal risk-management. If the transaction volume is too big, you might be caught,” said Li, who was unwilling to give his full name because of the sensitivities of the issue.
Miners undaunted
Players in China’s crypto mining industry were also broadly unfazed by the latest crackdown, again citing the difficulties regulators would have in identifying transactions.
China-based miners have the opposite problem to investors, as they already have bitcoin which they need to change for yuan to pay their electricity costs.
Mining is big business in China, which accounts for as much as 70% of the world’s crypto supply, according to some estimates, although others say that proportion has come down in recent years.
“The Chinese government does crack down from time to time, but currently it is not overly challenging to convert mined coins to RMB for Chinese miners,” said Thomas Heller, chief business officer of Compass Mining, using another word for China’s currency.
Although the new rules ban crypto-related investment products, such schemes are still sold online.
One platform offering retail investors a chance to quadruple their money over three years by buying computing power for miners of a smaller cryptocurrency, Filecoin, which has surged in popularity in China, still seemed to be accepting money on Thursday.
Flex Yang, chief executive officer of Babel Finance, a cryptocurrency financing firm, remained bullish.
“Bitcoin prices dropped more than 50 percent last year in March but eventually rebounded back to a new record high,” Yang said.
“In the long run, bitcoin still makes for an excellent asset class for portfolio managers seeking growth.”
Bitcoin bounces back but the crypto turmoil isn’t over
New York (CNN Business) The cryptocurrency market stabilized Thursday, with bitcoin ( ARSC ) climbing back above $40,000. Even so, the world’s largest digital currency has lost more than 30% in market capitalization since its peak in mid-April.
The wider crypto market looks similarly bruised.
Several digital currencies are still showing double-digit percentage losses from where they were before the latest turmoil. And all the crypto bloodletting points to a big warning: invest at your own risk.
Since May 12, the global cryptocurrency sector has lost more than 30% of its total market value, according to data from CoinMarketCap . By Thursday morning, the world crypto market value had fallen to nearly $1.8 trillion, down from more than $2.5 trillion just last week.
This week’s steep selloff came on the heels of China cracking down on cryptos . In response, bitcoin tumbled to just above $30,000 as digital currencies across the board sold off.
But investors shouldn’t be surprised about the volatility, William Quigley, managing director at crypto-focused investment fund Magnetic said on the CNN Business digital live show Markets Now Wednesday. Cryptos are still a relatively new asset, Quigley noted, and are therefore far less predictable than more traditional investments.
“Keep in mind as well, we all tend to focus on day-by-day, week-by-week. But that’s not how most people buy cryptocurrencies, or even stocks,” Quigley said.
Meanwhile, ethereum co-creator Vitalik Buterin told CNN Business that he believes cryptos are in a bubble. And it’s hard to tell when bubbles will burst.
ethereum ELX Then again, the momentum could keep building: Since the start of the year,and joke-turned-crypto dogecoin have increased in value nearly 290% and more than 8,000% respectively — even after accounting for the recent rout. Bitcoin is up more than 40% in that time frame, according to Coindesk data.
Ups and downs
Bubble or not, the crypto landscape looked to be on the road to recovery Thursday.
“The bigger the drop, the higher the bounce,” Fawad Razaqzada, market analyst at ThinkMarkets, said in a note.
Bitcoin is up some 18% and was at more than $41,900 early Thursday. Ethereum rose 22% to around $2,900.
“But it remains to be seen whether the recovery will hold,” Razaqzada added. “Cryptos will likely stay volatile for a while as speculators weigh the impact of China’s ban and Tesla’s U-turn against the recent growth in institutional interest.”