Bitcoin, the world’s most valuable cryptocurrency, experienced a volatile month as the price of BTC dropped from approximately $60,000 on 10 May to as low as $31,000 on 24 May. There were several reasons behind the latest market correction. Cryptocurrency analysts believe that new investors in the market panicked from the latest announcement from China about a ban on crypto payments and a potential crackdown on the mining of Bitcoin and other cryptocurrencies.
China’s stance on Bitcoin and other digital currencies is nothing new. So, the potential impact of the latest crypto ban from China is limited and the recent correction in the cryptocurrency market has actually provided an opportunity to long-term holders of digital currencies to accumulate more.
Crypto Ban from China
Finance Magnates asked Maria Stankevich, Chief Business Development Officer at EXMO UK, about her views on the recent crypto ban from China and the role of new traders in the latest crypto market correction. The “Chinese government still allows people to store and use cryptocurrencies at their own discretion. It all looks like a completely logical addition to the past restrictions on trading – so I don’t really understand the buzz this news [has] created. Of course, it is sad, but nothing much changed. Unfortunately, the buzz around China triggered the transfer of cryptocurrencies from wallets to exchanges.”
“During the day, almost 31k Bitcoin got to the exchanges, which is almost comparable to the daily amount of BTC transferred by investors on Black Thursday in March 2020. One of the reasons for the popularity of mining in China is the surplus of cheap electricity. I think that a complete ban will not happen, but the government will distribute some sort of mining license. I know that many mining companies have stopped operations there and are moving their services to North America, Canada and Europe,” she said.
When asked about the role of new Bitcoin and cryptocurrency investors in the recent correction, Stankevich replied: “New traders who are trying to accelerate the price of bitcoin get nervous when the price stops rising at a high rate. The market was quiet since March 15, and the majority of traders in this case simply started selling and losing their head. And, then we have the domino effect – that is exactly what we’ve been observing for 2 weeks. I am confident that the 30,000 level will be a strong obstacle to further decline, as it was the support level in January and February. In addition, I am confident that large funds will start buying now to prevent further falls. As for getting mature over time – I think that as soon as we have proper regulation and some ban on market manipulation the market will definitely grow into something more solid and stable.”
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No Country Can Stop Bitcoin
Additionally, Jason Deane, Bitcoin Market Analyst at Quantum Economics, expressed his views about the latest development. “In the long term, our view is that this is a very good thing. Not only has China consistently provided uncertainty and been somewhat unpredictable when it comes to cryptocurrency in general and Bitcoin in particular, but it has also helped perpetuate the ‘bitcoin mining is centralized’ and ‘bitcoin mining uses dirty power’ narrative for some time – even though the headline story is much more nuanced than that. This move effectively disproves the former argument and removes the latter, clearing the way for wider adoption, development and investment. No country can stop Bitcoin at this stage, it can simply choose to remove itself from the network on behalf of its people,” he commented.
When asked about the correction in the cryptocurrency market, Jason said: “It does appear that most sellers were, broadly, the most recent buyers with most coins being quite young and the vast majority being linked with retail activity. This is completely normal in a bull market correction where new buyers are easily spooked by large movements and quickly add to selling pressure. However, it must be remembered that those investors who were new in the 2017 peak went through the same thing, and those that held would now be considered mature holders themselves. Over time, as both the market and investors themselves mature, the balance of that equation shifts, creating (in theory at least) a more stable asset and store of value in the long term.”
Opportunities for Bitcoin Miners
Marc P. Bernegger, Founding Board Member of Crypto Finance AG, highlighted different opportunities for Chinese crypto miners after the latest restrictions. “I personally see a lot of long-term advantages if crypto miners are moving out of China into more crypto-friendly jurisdictions. This could also challenge the argument of the energy-waste of Bitcoin and turn more existing miners into renewable energy-based mining facilities. In general, several bad crypto-related news from China are mostly exaggerated and every few months there are similar announcements. There are already some operations from Chinese crypto miners here in Switzerland and it’s not a big secret that the recent announcements from the government will further push Chinese miners to Switzerland and other more crypto-friendly countries,” he said.
“Being invested in Bitcoin since 2012 myself makes me feel quite confident that after the actual price correction we will see new all-time highs going forward,” Bernegger added.
Joaquim Matinero Tor, Banking, Finance & Blockchain Associate at Roca Junyent told Finance Magnates that the recent move from China looks like a strategic announcement to move forward with Digital Yuan. “China has banned Bitcoin 13 times since 2012 so there’s no news there. China wants to move forward with Digital Yuan, its CBDC, so they want a BTC not so strong as it has been during the last few months,” he said.