The Impact of China’s Crackdown on Crypto

The Impact of China’s Crackdown on Crypto

As a topic of discussion in finance over the past decade, cryptocurrency has often only pointed in one direction, up. Although early critics and sceptics had doubts that the decentralized currencies would ever find mainstream use, the past few years have certainly shown that not to be the case and different industries have started to adopt the usage adding some legitimacy, whether that be through online entertainment as betting and gambling options where players can find some here for example utilise different crypto coins, right through to the announcement that was made that Tesla may be prepared to accept the currency before turning back due to environmental concerns.

(Image from reuters.com)

Alongside other announcements made earlier in the year that banks may be closer to adopting the bigger coins, notably in Bitcoin, it pushed the market into a bit of a frenzy leading to Bitcoin hitting an all time high of over $60,000 – and whilst banks accepting the coin mostly goes against what decentralized currencies stand for, progress is progress. Despite all of the good news, however, crypto was once again dealt a huge blow showing just how volatile the market can be.

It has been suggested that over 70% of the Bitcoin mining and usage originates in China with farms set up on an industrial scale, with other coins likely being the same, but with once again environmental concerns and concerns that it could disrupt the normal order of the economy, with illegitimate and illegal uses being cited, the value of Bitcoin nearly halved overnight, and although seeing a little recovery, may be meaningless in the grand scheme of things. Ultimately over time the biggest thing that has continued to hurt stability for all crypto currency has been within whether or not it can have legitimate use, many individuals, much like China’s central bank, still believe that the only people using the coins for actual currency are doing it for less than legal purposes, and there is still a large stigma attached – although it may be easier for individuals to mine different crypto currencies with the crackdown, the real impact of China turning its back on decentralized currency could be that it hurts this reputation further, particularly with the reasons being cited.

Whilst this certainly won’t be the end of cryptocurrency and other big changes could have a wider impact yet, it is a big blow particularly to the biggest and most well-known of the coins, and if a new home for miners that continue to fuel the market can’t be found particularly with the huge power draw required and the growing attention paid to the concerns mining brings, it could be a tough short period for those most invested.