China Prohibits Crypto Storage: Shockwaves Struck Global Markets
As China hooligans personal crypto holdings, traders brace for volatility– explore the potential consequences for bitcoin and the broader crypto industry.
The media reported that Chinese authorities have actually introduced a ban on cryptocurrency storage. Earlier, the nation had already stated mining and trading in digital possessions unlawful. The crypto market fell in response to the news. Here is how the current restriction by Chinese authorities may impact the crypto industry.
What Happened
The Chinese federal government has announced brand-new limitations on the crypto community. Authorities now prohibit not only the trading and mining of cryptocurrencies, but also the personal ownership of digital assets such as Bitcoin. The ban could encourage higher decentralization of cryptocurrency use in Asia, as users seek out jurisdictions with more favorable policies. The decision highlights the Chinese authorities’ desire to centralize control over the financial system, particularly amid the promotion of the digital yuan. The national cryptocurrency is a central bank digital currency (CBDC). Control over the circulation of the digital yuan is totally in the hands of the authorities. Regulators see traditional cryptocurrencies such as Bitcoin as rivals to their CBDC. These restrictive measures aim to lower Chinese users’ interest in other digital coins.
The decision to prohibit personal storage of cryptocurrencies was preceded by news of the sale of confiscated cryptocurrencies by Chinese authorities. Even after regulators sold some of the coins, China remains second among countries with the largest holdings of BTC. The PRC has 194,000 Bitcoins worth $20.6 billion on its balance sheet, or 0.924% of the cryptocurrency’s total supply. The sale of such a volume of BTC could be a significant blow to the market. At the same time, it is not known whether the ban on crypto storage extends to government agencies, or whether China plans to liquidate all its holdings. Particularly, there were earlier reports circulating in the market that China might, on the contrary, lift restrictions on crypto.
Market Response
The crypto market reacted to the news with a drop. Bitcoin fell to $104,684 at one point, but then began to recover. At the time of writing, BTC is trading at $104,541. Following BTC, numerous altcoins also decreased. Among the top 10 by market capitalization, Cardano recorded the largest losses in 24 hours (-5.55%). Many members of the crypto community had trading positions liquidated in the middle of the fall of Bitcoin. For instance, popular trader James Wynn liquidated 949 BTC ($99.3 million). The crypto community has ridiculed the Chinese authorities’ efforts to ban their residents from utilizing cryptocurrencies. In their opinion, these restrictive measures will not force the Chinese to stop using Bitcoin.
Not the First Restriction
The ban on private storage of cryptocurrencies is not the first for Chinese crypto community members. PRC regulators have been consistently suppressing the crypto market for several years. In September 2017, China banned ICOs and crypto trading. Amid the PRC authorities’ pressure on the crypto industry, BTC fell in price by almost 40% almost overnight. However, by December 2017, Bitcoin reached a new all-time high near the $20,000 mark. In May 2021, Chinese authorities imposed a ban on mining. The decision hurt the market because, at the time, the PRC was the primary center of bitcoin mining. As Chinese miners had to shut down their equipment and look for a new home, the BTC hashrate collapsed rapidly. The price of Bitcoin dropped as well, with the depth of the fall exceeding 50%. However, by November 2021, BTC reached a new all-time high near $69,000. Past market crashes following crypto restrictions in China suggest that regulatory pressure from Chinese authorities is not fatal to the market. Another restriction is unlikely to pose a major issue for the global crypto community.
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