Despite a crackdown by one of the world’s largest economies, many in the environment have characterized this downturn as a temporary correction. The cryptocurrency market experienced a significant penalty on Wednesday, with the values of major currencies such as Bitcoin, Ethereum, BNB, and others plummeting by up to 30% in less than 24 hours. This comes as a result of Chinese regulators launching a ban on cryptocurrencies on Tuesday.
What announcements has China made?
China has prohibited financial institutions and payment service providers from offering any services associated with cryptocurrency transactions. This ensures that banks and online payment processors are prohibited from providing clients any cryptocurrency-related services, such as registration, trading, clearing, and settlement. China released a similar prohibition in 2017, but the current regulations broaden the reach of banned services and assert that “any real value does not back virtual currencies.”
How did the cryptocurrency markets fare?
According to cryptocurrency trading site Binance, Bitcoin — the most well-known cryptocurrency — was trading nearly 21% lower at $34,693.1 as of 7 p.m. IST Wednesday. Ethereum, another widely used cryptocurrency, fell 25% to $2,453.15, while Binance Coin, or BNB, fell nearly 31% to $353.12.
Is China’s announcement the sole factor that contributed to this crash?
Although the Chinese announcement was the last straw, Bitcoin and Ethereum have been declining after Tesla CEO Elon Musk revealed last week that the electric carmaker would no longer accept Bitcoin as payment — reversing an earlier decision.
What comes next?
Despite a crackdown by one of the world’s largest economies, many in the environment have characterized this downturn as a temporary correction. “While a nearly 40% drop in bitcoin’s price from its all-time high seems drastic, it is common in many volatile markets, including crypto, especially following such a large rally. These corrections are primarily the result of profit-taking by short-term traders. Long-term value investors, including MicroStrategy, will view these lower prices as a buying opportunity,” Avinash Shekhar, Co-CEO of ZebPay, an Indian cryptocurrency exchange, said.
