Daily Management Review

Bitcoin Drops Below $30,000 With Expansion Of Chinese Crackdown On Crypto


Bitcoin Drops Below $30,000 With Expansion Of Chinese Crackdown On Crypto
Following a deeper and expanded crackdown on cryptocurrencies by China’s central bank, the value of bitcoin dropped below $30,000 for the first time since January.
Bitcoin, the largest cryptocurrency of the world slumped to $29,332 which was the lowest for the value since January 27 as the drop offset the gains made earlier in Asia by the cryptocurrency. This drop also resulted in fall in prices of smaller cryptocurrencies such as ether.
With a drop of more than 10 per cent on Monday, marking the largest one-day drop in more than a month, which pushed the weekly loss alone to almost 30 per cent and which wiped out the gains made by the crypto so far this year.
The direction of the People's Bank of China (PBOC) to the country’s largest banks and payment firms of not supporting transactions of cryptocurrencies, the latest measure by the authorities of the country in a wider strategy of tightening of restrictions on the sector which resulted in a sell off spree of bitcoin.  
A change in regulations in 2017 had effectively pushed crypto exchanges out of China. But there has been sprouting of foreign based over-the-counter (OTC) platforms which are being used for receiving payment from people based in China as well as for purchasing cryptocurrencies on their behalf.
"It basically says now OTC transactions are not legitimate ... we are not allowed by the banks to transfer money for cryptocurrency purchases and sales," said Bobby Lee, chief of cryptocurrency wallet app Ballet and formerly CEO of BTC China, China's first bitcoin exchange.
Announcements of stepping up their monitoring to root out crypto transactions were made by banks including Agricultural Bank of China, and Ant Group's ubiquitous payment platform Alipay, following the statement on the issue from the PBOC.
The value of bitcoin has dropped by more than half from its peak of almost $65,000 in April even though it is still up by 2 per cent year-to-date.
A similar ban on crypto-related financial services was issued by three industry associations last month even though market experts said that the ban would be difficult to implement because banks and payment firms would find it difficult to identify crypto-related payments.
"We are definitely in the midst of a correction," said Anthony Wong of Hong Kong-based crypto firm Orichal Partners.
"This time China's iron-fist ban on crypto seems to be more serious than back in 2017 as the directive came straight from the top."
Cryptocurrency miners have already been targeted by Chinese authorities. Restrictions on producers as well as traders of bitcoin would by tightened by it, China's State Council, or cabinet, said last month.
Restrictions have also been announced on bitcoin mining by authorities in major mining hubs including Sichuan, Xinjiang, and Inner Mongolia.
"Some of the miners in China may be more willing to sell their bitcoin now versus when they are able to run their mining operations, because they have to raise cash," said Seth Melamed, of Tokyo crypto exchange Liquid.