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Monday, November 27, 2023

Bitcoin plunges to a shocking 20% after Chinese crackdown

Bitcoin and other major cryptocurrencies slumped after the People’s Bank of China reiterated that digital tokens can’t be used as a form of payment.

For the first time since February 9 this year, Bitcoin fell to an all-time low, extending losses to 20% in the last 24 hours. The cryptocurrency has been falling consistently this month and as of 5:40 PM PST, the bitcoin is valued at USD 36,360 according to Moningstar’s data.

The sharp fall in Bitcoin value occurred after Chinese regulators intensified efforts to crack down on the use of cryptocurrencies by financial institutions.

Recently, banking and industry associations issued a joint statement on China’ s WeChat account stating that virtual currency is not a real currency and should not be accepted as payments for goods and services.

China has warned its investors against speculative trading in the world’s most famous cryptocurrency. This is despite the fact that China mines the highest amount of world’s cryptocurrency.

China’s pressure on cryptocurrencies gained pace in 2017 when it closed the country’s bitcoin exchanges, which had previously accounted for the majority of global trading. In 2019, the country banned crypto trading to prevent people from illegally transferring their money abroad.

The policy was also to curb the money laundering of the people who park their money abroad in tax havens.

The three state-backed industry associations in China, the National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China released a statement saying, “cryptocurrency prices have skyrocketed and plummeted, and cryptocurrency trading speculation activities have rebounded”.

Read More: KPK advisory committee discusses regulating, legalizing cryptocurrency

According to the statement, such fluctuations are harmful to people’s economic stability as they “violate people’s asset safety”.

The statement highlighted the risks of cryptocurrency trading, saying virtual currencies “are not supported by real value”, their prices are easily manipulated, and trading contracts are not protected by Chinese law, international news agency Reuters reported.

According to a document, China’s Inner Mongolia has set up a virtual currency mining reporting platform. The public can report mining activities to the government. In February, Inner Mongolia requested a complete shutdown of mining.

Bitcoin came down tumbling from a record high value of $64,870 last month to below $37,000 today. According to media reports, analysts are of the view that the digital token would hit the low of $30,000.

The Musk effect

One of the biggest influencers of cryptocurrency has been Tesla’s CEO Elon Musk. It was his tweet early on that had led to the bullish trend for the world’s leading cryptocurrency leading to an all-time high as mentioned above.

Read More: Elon Musk destroys bitcoin again with just one word

But later on, May 13th, when Elon Musk tweeted that the company would no longer accept bitcoins as payment, saying, “We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel,” adding that “Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment.”

But the latest fiasco began on 16th May when a Crypto Expert Mr. Whale tweeted, “Bitcoiners are going to slap themselves next quarter when they find out Tesla dumped the rest of their Bitcoin holdings. With the amount of hate @elonmusk is getting, I wouldn’t blame him…” To this tweet Elon Musk replied “Indeed”.

Within hours, the value fell by 8 percent to below $43000. Later, however, Tesla CEO clarified that the company had not sold any bitcoin and that bounced the value back up by 3.7 percent to $44,138 within about five minutes of Musk’s Tweet, according to cryptocurrency tracker Coinbase.

According to Bloomberg, there are other factors of this collapse, including a longstanding critique of the space, illicit usage. The financial news agency had also reported that  Binance Holdings Ltd., the world’s biggest cryptocurrency exchange, was under investigation by the Justice Department and Internal Revenue Service in relation to possible money laundering and tax offenses.

Read More: State Bank considering launching digital currency in Pakistan