Cryptocurrency, bitcoin, crashed below $30,000 Tuesday as China intensifies crackdown on miners and financial services dealing on cryptocurrencies.
It was the first time since January that the leading crypto coin is losing its grip on $30,000, which investors have touted as a high level of support.
The cryptocurrency traded at $29,700 briefly before press time, bringing the year-to-date gain down to just 3%, according to CoinDesk 20 data.
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The latest crash came after the People’s Bank of China (PBC) reiterated warnings to Banks not to provide products or services such as trading, clearing and settlement for crypto transactions, after cracking down on miners in the Sichuan province. The PBC pointed out that the speculative trading of virtual currencies will disrupt the normal functioning of the economy and the financial market, and will give rise to risks of illegal and criminal activities such as illegal cross-border transfer of assets and money laundering, and seriously infringe the property safety of the public.
“Banks and payment institutions are to strictly follow regulatory requirements in the Notice on Guarding Against the Bitcoin Risks, the Announcement on Preventing Financing Risks Related to Token Offerings, etc. They are required to fulfill their obligations of client identification, and not to provide products or services regarding account opening, registration, transaction, clearing and settlement for related activities. They are required to screen accounts opened with them and identify those of virtual currency exchanges or over-the-counter (OTC) dealers, and cut off their payment channels for trading funds.
“They are to analyze the characteristics of funds for virtual currency speculation, mobilize more technological resources, improve their models for monitoring irregular transactions, and thus enhance their capacity of monitoring and identifying irregularities. In addition, banks and payment institutions are required to improve their internal systems, make clear assignment of tasks, and ensure that accountabilities are fulfilled and that monitoring-related negligence is treated effectively,” the apex bank said.
In response, the affected banks, the Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank, Postal Savings Bank of China, Industrial Bank, and the Alipay said they will abide by the new rule. The banks have each issued a statement to confirm the receipt of the guideline and their readiness to follow it.
Bitcoin is back trading above $30,000, but the impact of China’s regulatory policies is triggering a selloff that Chinese investors are forbidden to buy.
The market looks south with demand-side pressures weakening in the wake of regulatory fears and the Federal Reserve’s recent hawkish tilt, analysts told CoinDesk.
“There’s no direct evidence showing people in China are buying the BTC dip. As shown in the ChaiNext tether (USDT) OTC index, the value hovered at 99 for the last few weeks in June, which shows a slight discount in trading USDT,” Matthew Lam, an analyst at crypto exchange OKEx, said.
“There is little evidence of dip demand. People are still sidelined,” Amber Funds said in a Telegram chat.
With the concern of carbon emission emanating from mining still holding off interest in the west, the hope of swift cryptocurrency market rebound is not sure.
The environmental impact of bitcoin mining forced the coin to crash 35% in May, from its more than $64,000 peak in mid-April, as China commenced its regulatory crackdown.
Last week, the Federal Reserve unexpectedly brought forward the timing of the first interest rate hike to 2023, adding to bearish pressures around the cryptocurrency.
Bitcoin has been down around 8% on a 24-hour basis, other major coins like ether, XRP, and Cardano are nursing 10%-20% losses. Dogecoin, the joke cryptocurrency, is trading 25% lower.
As such, bitcoin’s dominance rate, or the top cryptocurrency’s share in the total market, has hit one-month highs above 47%, per data source TradingView.
However, many crypto investors are still keeping a positive outlook. Mike Novogratz told CNBC on Tuesday that bitcoin faces near-term uncertainty after falling below $30,000, but he maintained a long-term positive outlook.
“We had China really be much more forceful in their idea to ban cryptocurrency. That’s created a retail deleveraging, ” Novogratz said on “Squawk Box.” “A lot of crypto happens in Asia, a lot of it is Chinese focused. So we’re seeing big liquidations, so it’s hard to call a bottom.”
“We’ll see if it holds on the day. We might plunge below it for a while and close above it,” Novogratz said, referring to the $30,000 price level, which some technical analysts saw as a key support level for bitcoin.
“If it’s really breached, $25,000 is the next big level of support. Listen, I’m less happy than I was at $60,000, but I’m not nervous,” added Novogratz, founder and CEO of Galaxy Digital, a crypto-focused financial services firm.