Cryptocurrency update: China’s hard-line crypto stance gets harder

Crypto took a battering over the weekend as China stepped up its anti-mining squeeze. With Bitcoin gains wiped out, how will the market react?

Cryptocurrency update

China crypto crackdown continues

Chinese authorities continue to hammer domestic Bitcoin miners.

HashCow and BTC.TOP are the two latest miners to suspend or scale back operations after Beijing stepped up its anti-mining sentiment. Exchange Huobi said on Monday it will no longer be accepting new users from mainland China. The exchange will now be focussing on overseas customers.

This is seismic for the world of crypto mining as China accounts for 70% of global token supply.

It’s thought part of the reason for the move against miners is partly driven by environmental concerns. The two provinces where the bulk of Chinese mining takes place – Inner Mongolia Autonomous Region (IMAR) and the Xinjiang Uygur Autonomous Region (XUAR) – draw energy from coal-fired power stations. With China pledging to slash greenhouse gas emissions by 2060, it’s doing what it can to clean up its act. At least, that’s how it appears on the surface.

The reality is likely Beijing wanting to exert more control over cryptocurrencies. A statement made on Friday by the State Council said the move would “crackdown on Bitcoin mining and trading behaviour, and resolutely prevent the transmission of individual risks to the social field.” This latest move is a way for China’s government to exert its considerable influence over a new, rapidly evolving economic sector.

As you can expect, the consequences for crypto markets have been massive to say the least. Token prices have plummeted.

Miners, who typically don’t hedge all their minted digital tokens into fiat straight away, are thought to be divesting themselves of their stakes. A broader sell-off is underway, which has caused a freefall in crypto asset prices.

May has not been kind to digital currencies. Rumours of tighter crypto exchange regulations and capital gains tax hike proposals in the US gave investors jitters at the start of the month. Tesla turning its back on BTC payments caused further wobbles. China’s hard-line stance was enough to trigger the freefall.

BTC & ETH start on the long road to recovery

Crypto market bellwether crypto BTC took the heaviest body blows following the China news. BTC is trading just shy of 50% lower than April’s $64,000 all-time high at around $36,500.

At the bottom of the trough, prices had slumped to $31,107. Essentially, all gains made since February have been wiped out. Volatility in digital currency markets is nothing new, but BTC will have a long way to go before it reaches new all-time highs. Recovery, as we can see from the price action above, has started but it remains to be seen just how quickly it can regain traction.

Ether, which had only 17-days ago broken the $4,000 barrier for the first time, fell 17.4%, with its lowest level registered at $1,868.79. Since then, the token, used on the Ethereum blockchain, has climbed back to $2252.50. Even with the price hit, ETH is up over 159% year-to-date.

Musk defends the doge

Dogecoin, the memecoin beloved of Elon Musk and thousands of internet traders, gets support from the enigmatic billionaire.

Musk reiterated his position in response to an investor implying the Tesla CEO has an impressive Dogecoin holding.

Yeah, I haven’t & won’t sell any Doge

— Elon Musk (@elonmusk) May 20, 2021

Elon and his Twitter escapades are very familiar for crypto market investors and observers. Seemingly his every tweet has the power to create major price movements. And, despite all the volatility at hand, and Tesla u-turning on BTC acceptance, Musk is doubling down on crypto, although framing himself as some sort of crypto martyr.

The true battle is between fiat & crypto. On balance, I support the latter.

— Elon Musk (@elonmusk) May 22, 2021

Dogecoin has gained 3.4% as of Monday 24th May following the weekend’s bloodbath.