Despite China's ban, the cryptocurrency market starts the week trades in green candles as seen today, Monday 27th September with and overall market cap sitting at $1.94 Trillion which shows a 6.98% rise as regards the previous day. This represents a 20.03% total market volume increase recording $113.78 billion within 24hours with the entire volume in DeFi at $20.73 billion accounting for 18.22% of the total crypto market volume.
This is far from the first time China has spoken out against Bitcoin. While the most recent campaign might feel like the most aggressive to date, it’s worth remembering that this dance between Chinese regulators and the world of digital currency has been going on since 2013.
Headlines about China’s scrutiny and regulatory interests have popped up several times in the past eight years—and generally, that has resulted in a sell-off. Case in point: The price of Bitcoin fell 3.6% to $42,200 on the news today. But when the news cycle is over, inevitably, crypto prices have started to rise again.
This covers the trading of digital assets, order matching, token issuance, and the issuing of derivatives, among others. According to the organization, foreign cryptocurrency exchanges that provide services to Mainland Chinese customers are now prohibited from doing business in the country.
As a result, it will be fascinating to observe how the markets react to China’s newest cryptocurrency ban, if institutional investors are moving their focus away from Bitcoin and towards Ethereum, and whether the Lightning Network reaches new milestones this week.
Bitcoin finds support at $41,000
After experiencing price declines over the previous two weekends, Bitcoin has found price support around the $41,000 mark. Aside from the recent China-related fear-mongering, the network’s fundamentals continue to seem robust.
According to Glassnode, the lightning network, which is a Bitcoin layer two scaling solution, has reached a new all-time high for the number of open channels. There are now 72,380 active payment channels on the network, resulting in a 226% increase over the steady baseline of 32,000 channels set in 2019-2
Currently, the flagship digital asset is trading at $43,757, up 6.65% in the last 24 hours and down 2.02% over the previous seven days.
Alternatively, prominent crypto chart analyst Josh Rager thinks that Bitcoin is now in a neutral state and that it is still ranging in the lower time frames, but that it has not yet proved to be able to break out of the downtrend. Prices must break back over $45,000 for him to see the market continuing to rise with higher lows.
Interestingly, the flagship digital asset has Bitcoin declared ‘dead’ 37 times this year, twice more than compared to the whole of 2020; nevertheless, despite the obituaries, the asset has continued to show the capacity to rebound from market crashes as it has done in the last 24 hours.
On Monday, China's central bank The People’s Bank of China (PBOC) also met with several domestic banks and payment firms such as Alipay, urging them to tighten restrictions on cryptocurrency trading and directing them to stop facilitating cryptocurrency transactions. These institutions must also comprehensively investigate and identify crypto exchanges and over-the-counter capital accounts of dealers and cut off the payment link for transaction funds “in a timely manner”, it said.
The two aforementioned firms that provided around 50% of the total global hash rate could have easily worked together — or have been forced to work together by the Chinese government — to perform a hostile takeover of the Bitcoin blockchain. Because these firms were forced to downsize and move their operations abroad, there is no longer a potential for government intervention in the blockchain.
However, we must also look at the ripple effect that China’s Great Leap Backwards may have. If other countries decide to prohibit cryptocurrency mining, we could see a massive decrease in the hash power available to all cryptocurrencies, including Bitcoin.
Governments intrinsically cannot and should not support cryptocurrencies, as cryptocurrencies are designed to counteract the oppressive and sometimes even undemocratic behavior of central authorities like the Federal Reserve. Therefore, governments will naturally do what they can to halt the rise of cryptocurrency in our daily lives, including prohibiting the mining of cryptocurrencies.
Bitcoin will be target No. 1, and an easy target at that, in its current form as a proof-of-work chain that requires mining.
Only the future can tell whether Bitcoin will be the MySpace of crypto or be able to evolve to survive. For now, though, I encourage you to read up on Ethereum and other proof-of-stake projects.
If Bitcoin’s hash power providers cannot collaborate to shift the blockchain to a proof-of-stake system, Bitcoin’s days are numbered.