- $BTC dropped almost 6% in the space of one hour to a September 24 low below $42,000; $ETH and top DeFi tokens plunged more than 8%
- Chinese officials have often announced policies which spook crypto markets, but have little long-term effects
Digital asset prices took a nosedive Friday morning, shortly before 9:00 (UTC), on the publication of a People’s Bank of China regulatory notice that was issued on September 15th, but posted on the PBOC’s offical web site and Chinese social network WeChat today.
Almost 1,200 BTC, or about $50 million dollars, were liquidated over a space of three hours this morning, according to data from Crypto Quant.
China has previously attempted to reign in digital asset trading, including bitcoin, negatively impacting markets, notably in May and July. Despite today’s decline, the announcement appears to be primarily a stronger restatement of Chinese officials’ previous stance on trading activity by Chinese citizens.
According to Bloomberg, the new statement declares that “all crypto-related transactions, including services provided by offshore exchanges to domestic residents, are illicit financial activities,” indicating the latest move is an attempt to widen the remit of the previous bans.
Still, China watchers question whether today’s news represents a meaningful change in Chinese policy. According to Matthew Graham, CEO of Sino Global Capital, it is not.
Zeeshan Feroz, Chief Growth Officer of MoonPay agrees:
“I don’t think anything particularly new was announced today. The PBOC has been experimenting with a digital Yuan which clearly shows that the bank sees the promise in the underlying technology but is not supportive of non-sovereign digital currencies.”
As Blockworks noted in July, crypto markets seem to respond in an exaggerated way to negative news emanating from China, even as the practical impact on digital asset regulation remains unclear and will take time to develop.
Bitcoin has traded in a range from roughly $30,000 to $50,000 since May, when industry trade group reiterated their compliance with prior People’s Bank of China edicts regarding cryptocurrency, news which coincided with a 30% crash in the bitcoin price.
In June, a crackdown on bitcoin mining operations in the country forced mining hashrate to move abroad, precipitating a retest of bitcoin’s yearly open of approximately $28,600.
In July, it was a PBOC-issued statement regarding Beijing Qudao Cultural Development Limited, a software company providing software services to crypto trading firms, again holding spot prices near $30,000.
From late July, $BTC rallied 80% to nearly $53,000 per bitcoin on September 7, the day El Salvador adopted the currency as official legal tender, before the latest 25% retracement.
“China’s latest move is not surprising given its history of anti-crypto actions,” said Haohan Xu, CEO of digital asset trading network Apifiny, adding “If China continues to enforce at this magnitude, crypto trading will shift to venues in countries with more stable regulatory environments, which means more predictable liquidity and healthier, more robust trading across the globe.”
Given that today’s notice from China’s Central Bank is regarding previously announced policy, one which markets have already had time to digest, the sharp drop in crypto prices reflects general skittishness among investors at the end of a tumultuous week of news: a notable pullback in equity markets, fear of Evergrande debt contagion and harsh remarks from SEC chair Gary Gensler.
S&P 500 Futures were also lower, down -0.4% at time of publication.
Casey Wagner contributed reporting.
This article was updated September 24, 2021, at 1:25 pm ET.
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