China criticises Bitcoin and mining; market falls

The Xinhua News Agency of the PRC published a material with criticism of Bitcoin and cryptocurrency mining. The publication complements the authorities’ earlier stance, who urged to take measures against the mining and trading of digital assets.

The authors of the piece, under the heading “Urgently stop the hype and chaos around virtual currency,” pointed to the risks and negative effects of cryptocurrencies.

«Illegal and speculative transactions of Bitcoin or illicit issuance of tokens could inflict substantial losses on investors on one hand and affect the financial stability of the state and order in society on the other», the article says.

The agency asserts that Bitcoin “is not and will not be a currency.” Investors and financial institutions are advised not to participate in trading the asset.

They banned local companies from supporting a digital-asset–related business, and citizens were advised to refrain from investing in this class of financial instruments.

The publication also mentions mining and projects that mislead the authorities “in order to gain support.” The agency also warned organisations dealing with participants in the cryptocurrency industry about their responsibilities.

According to Reuters, the BTC.TOP mining pool and the HashCow bitcoin-mining company have already halted operations in China.

Against this backdrop the market moved into the red zone. At one point Bitcoin traded below $31,100. In the last 24 hours the flagship cryptocurrency shed 3.1%.

Over the last 24 hours Ethereum fell by 3%, Cardano and Binance Coin by 4.3% and 5.3% respectively. Among the top five crypto assets by market cap, only the stablecoin USDT from Tether rose, according to CoinGecko.

Colin Wu noted that there is currently no definite information beyond the State Council’s statement. He said that due to this uncertainty any news or rumours “may cause market volatility.”

In fact, at present, there is no definite information about China other than the words of the State Council, «crack down Bitcoin mining and trading». Because of this uncertainty that any small news or even rumors can cause market volatility.

— Wu Blockchain (@WuBlockchain) May 23, 2021

«It is highly likely that in the coming week or even month this chaos will continue», Wu said.

According to analyst Nic Carter, Bitcoin has entered “the most critical period” in its history. He added that the word “critical” does not assign a positive or negative evaluation to what is happening, but merely underscores its importance.

We might be entering the most critical period in bitcoin history, exceeding even the latter half of 2017

— nic carter (@nic__carter) May 23, 2021

The analyst referred to his own tweet, in which he stated that all signs point to the hashrate migrating outside China.

this is what i’m referring to ffs. https://t.co/O82yLTBYif

— nic carter (@nic__carter) May 23, 2021

Justin Sun, founder of TRON, suggested that the bull market is not over yet.

«We are in a period of correction of the bull market. June will create a sustainable trend. July and August, without doubt, will herald the start of a new leg of the bull market», — wrote Sun.

The managing partner of Primitive Ventures, Dovi Wan, said that China’s mining crackdown will make it greener. In the long run this should be positive for the price.

China located mining out > less coal > greener > and green is good > up

IYKYK

— Dovey “Rug The Fiat” Wan🪐🦖 (@DoveyWan) May 23, 2021

Analysts consulted by The Block highlighted several catalysts that could lead to a market capitulation:

• «a surge from losses of the largest holders» (MicroStrategy, Tesla);
• institutional investors exiting crypto due to high volatility;
• increased selling by miners to cover costs of migration.

Earlier the Beijing municipal bureau of economy and information technology requested information from operators of local data-centres about their participation in mining cryptocurrency to assess the impact on electricity consumption.

In May 2021, China CITIC Bank prohibited individuals and legal entities from using accounts to buy and sell cryptocurrencies.

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