Cryptocurrency Bloodbath Continues as China Cracks Down
Bitcoin is hanging on the tenterhooks after a spectacular crash on Monday. The digital currency is now trading just above $6000, the first time since October 2017.
Bitcoin’s value has almost halved in just 3 days. Other cryptocurrencies have been similarly hit hard.
Crackdowns on cryptocurrencies from China and India, the Facebook ban on cryptocurrency ads were partly responsible for the dip. A number of credit card companies also announced they would no longer accept cryptocurrency transactions.
The controversy surrounding, Tether, the cryptocurrency ostensibly pegged on the dollar and used by several exchanges is already sending shock waves with reports the market might have been inflated by as much as 50% using the cryptocurrency.
For the first time, the crash seems to have had a ripple market on the more traditional markets. Dow Jones, for example, fell to its lowest point in more than six years with no apparent cause. The S&P 500 also lost more than 4%, almost the entire gain this year.
On Monday, China banned foreign cryptocurrency exchanges in a move that will further send the market reeling. China has one of the largest customer bases for cryptocurrencies and the biggest mining operations. Authorities have previously said they will gradually phase out mining activities in the country.
Cryptocurrency and ICO sites will now be put on the Great Firewall, making them inaccessible, a Chinese publication called Financial News reported citing government sources.
Cryptocurrency ads are said to have already disappeared from the websites in China.
In its signature protectionist stance, China it appears will allow local exchanges to operate within the country. Measures to eradicate local trading in cryptocurrencies seems to have failed, China Morning Post reports.
“To prevent financial risks, China will step up measures to remove any onshore or offshore platforms related to virtual currency trading or ICOs,” Financial News reported.
People simply switched to foreign exchanges after domestic transactions were banned, the publication associated with the People’s Bank of China reported. Another directive to financial institutions bars them from funding any cryptocurrency related activity.
Authorities might be fearing the huge capital flight out of the country occasioned by current craze that has gripped Asia’s largest economy. Authorities will further take measures trying to access foreign exchanges through VPNs, citing high the high risk in the market, Xinhua News Agency reported.
Many of the exchanges have relocated to Hong Kong, Japan, and Singapore after the initial ban. Chinese ICOs are normally drawn investors from the country. The ban could totally erase the market if fully implemented.
Authorities are fearing unrest following the frenzy of virtual currencies. Disgruntled investors on Saturday stormed the Beijing financial bureau after shares of an ICO named ARTS lost more than 80% of its value just two weeks after being launched, China Morning Post reported.
Bitcoin has now slightly recovered after a hitting a record low of nearly $6000 in early Tuesday trading. It now trading above $6500 on many exchanges. Whether it maintains the momentum remains to be seen.
However, the slight uptick could be false signal if the allegations around Tether are true. Investors could simply be converting their Tether tokens into bitcoin resulting in a temporary spike.