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Bitcoin Falls by $3,000 as Chinese Government Begins Crypto Crackdown
It hasn’t been the best month for Bitcoin – or cryptocurrencies in general. The crackdown that the Chinese government has announced is already in motion, and the cryptocurrency market is feeling the ripple effect.
Bitcoin reaches six-month low
The central bank of China has launched a new array of measures aimed at cleaning up the industry, as it warned about potential security and legal risks in cryptocurrency trading. Bitcoin has immediately felt the repercussions of the new policy, as it dropped by 9% to a new six-month low on November 22, closing at $6,929. Just a month ago, Bitcoin saw a 28% surge in a bullish market, trading at almost $10,000. Five local exchange platforms have already announced that they would shut down or close off to Chinese traders as a result of the news.
The main rationale given for the measures taken is China’s effort to regulate the cryptocurrency market, known for its volatility and wild swings in prices. China has been consistently pessimistic about unregulated cryptocurrencies, as it has in the past even announced plans for its own government-backed digital coin, followed by a similar crackdown against local exchanges. The new crackdown is the latest move in the tug-of-war between cryptocurrency enthusiasts who take pride in the decentralized nature of digital currencies and the anonymity of the crypto world, and skeptics arguing in favor of more sophisticated regulation that would increase transparency across crypto-transactions.
Security a top concern in the crypto industry
With more than 1,000 cryptocurrencies having already failed, the sense of trust and security (or lack thereof) felt by investors is one of the factors that will define whether new digital currencies become successful. In an industry on the rise, traders need to feel safe. And with even legitimate bitcoin trading bots like Bitcoin Revolution overselling their potential by claiming a 95% success rate, as a recent review points out, consumers remain wary. It is this cautiousness that the Chinese government is tapping into, issuing restrictions that have Chinese traders rushing to move their assets from online exchanges and into private wallets. China-based exchange operators Akdex, Biss, and Bitsoda have already declared that they would halt their services. Rival provider Btuex also announced it would shut down and then relaunch serving only users based overseas, with its competitor Idax closely following suit.
This emphasis on tighter control of the market was viewed by some as contradicting earlier statements made by Chinese President Xi Jinping. At the start of November, he publicly expressed his support for blockchain technology, arguing that China needs to put more effort into harnessing its potential for growth. After the news Bitcoin jumped from $7,500 to an impressive $10,500 in a matter of hours. That upwards trajectory was subsequently cut short after the latest developments, with many commentators noting that what was perceived as indirect support of cryptocurrencies by the Chinese President was, in fact, applying only to their underlying blockchain tech.
As the impact of the new policy measures continues to be felt throughout the crypto industry, it remains to be seen whether other countries will get inspired to introduce more regulatory control as well.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes.