China Cracked Down on Bitcoin and other Altcoins!
China in July 2021 has stepped up efforts to rein in the country’s cryptocurrency industry, banning crypto mining operations and ordering major banks not to do business with crypto companies.
On July 27th, the Chinese government canceled the registration of company business with the help of legal authorities. Along with that, they warned all financial organizations to avoid providing virtual currency-related services directly or indirectly. The government issued a warning after three Chinese state-backed financial associations raised concerns about risks. They stated that risks appear from the volatility of cryptocurrencies.
Bitcoin is not backed by precious metals or government loans. Its price reflects only assumptions about its future value. As a growing currency, no doubt it is a risky investment with a varying volatile value.
If we considered its past, over ten years ago, Bitcoin suffered four individual losses of almost 50% price drop. It is rare in other altcoins and cloud technology. While there may be many factors behind the crackdown in China, authorities have made it clear on several occasions: fluctuations in bitcoin prices pose a threat to the country’s economic and financial stability.
The government said cryptocurrencies disrupt economic order and that it will “resolutely prevent the transmission of individual risks to the wider society,” declared State Council’s Financial Stability and Development Committee in a gathering chaired by Vice Premier Liu He, President Xi Jinping’s top representative on economic and financial matters.
We all know, China never compromises over the economic losses in the country. “The Chinese state in my reading has a fine-grained control over fluctuations in markets for important goods and assets,” pointed Isabella Weber, an assistant professor of economics at the University of Massachusetts Amherst. “Currently, there is growing concern around financial stability in China. In this context, the crackdown on cryptocurrency is an attempt to contain a potential source of instability,” she added.
This way, the Chinese government directed their segments including banks and online payment firms to not to provide any cryptocurrency-related services within the country.
The catch is China banned crypto exchanges only along with initial coin offerings. However, Chinna has not barred individuals from holding cryptocurrencies including Bitcoin and other altcoins.
They acted offensively, even though Bitcoin’s major tradings occur in China. One bitcoin’s data reveals that around 65% of bitcoin miners reside in China — the University of Cambridge estimated in April of 2020. This huge population is the ultimate result of powerful mining hubs of china that embrace Bitcoin (BTC) i.e., the world first, the largest, and most competitive cryptocurrency which can solve complex computational puzzles easily.
In short, the miners who reside in China helped Bitcoin raise its value from 1,000% to nearly 65,000 USD within a year. Where Chinese miners helped raising BTC value, it’s a downside that isn’t going anywhere.
After the Chinese miners commenced shutting down their cryptosystems, the value plummeted, closing out the first half of the year down almost 50% from its history.
However, in the case of China, the problem goes beyond the framework of a simple economy, because the political legitimacy of the government depends to a large extent on the success of the economic growth of the countries, said that Zennon Kapron, founder of Kapronasia, Fintech research and consulting.
