Bitcoin Tumbles Below $39,000 After China Issues Warning

Bitcoin plunged below $39,000 for the first time in more than
three months Wednesday after China said cryptocurrencies would not
be allowed in transactions and warned investors against speculative
trading in them.

The comments sent the unit diving more than 10 percent and dealt
it another blow soon after being battered by comments from tycoon
Elon Musk and his Tesla car company.

Trading in cryptocurrencies has been banned in China since 2019
to prevent money laundering as leaders try to stop people from
shifting cash overseas. The country had been home to around 90
percent of the global trade in the sector.

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

The price fluctuations “seriously violate people’s asset safety
and disrupt normal economic and financial order”, said the
statement, which was posted to social media by the People’s Bank of
China.

The notice warned consumers against wild speculation, adding
that the “losses caused by investment transactions are borne by the
consumers themselves”, since Chinese law offers no protection to
them.

It reiterated that providing cryptocurrency services to
customers and crypto-based financial products was illegal for
Chinese financial institutions and payment providers.

Bitcoin tumbled Wednesday from $45,600 to $38,570, its lowest
since early February, and well off the record high of $64,870 seen
as recently as last month. Analysts have warned it could go down as
far as $30,000.

“This is the latest chapter of China tightening the noose around
crypto,” Antoni Trenchev, managing partner and co-founder of
London-based crypto lender Nexo, said.

– ‘Here to stay’ –
Adam Reynolds, of Saxo Markets, added that avoiding use of
cryptocurrency, which can be transferred out of the country, is
“essential to maintaining capital controls” in China.

Bitcoin has had a torrid few days. It took a heavy hit at the
start of the week after Musk appeared to suggest Tesla was planning
to sell its huge holdings of the unit. And that came days after the
electric car giant said it would halt using it in transactions
because of environmental concerns.

“Elon Musk started the ball rolling,” Germany-based crypto
analyst Timo Emden told AFP. “It will take some time for them to
recover from this shock.”

However, some Chinese enthusiasts remained unfazed.

“This has happened before and it happens every year… Crypto is
here to stay,” said trader and ex-tech industry worker Zeng Jiajun.
“I think nothing will change until big exchanges like Binance close
their businesses for Chinese users, which is unlikely to happen
since those exchanges all operate abroad.”

China is in the midst of a wide-ranging regulatory crackdown on
its fintech sector, whose biggest players — including Alibaba and
Tencent — have been hit with big fines after being found guilty of
monopolistic practices.

The central bank has also sought to promote its own heavily
regulated digital yuan, which it is testing across the country in
pilot schemes.

Consumers already widely use mobile and online payments, but the
digital yuan could allow the central bank — rather than the big
tech giants — greater data and control over payments.

— Bloomberg News contributed to this story —

AFP

Bitcoin plunged below $39,000 for the first time in more than
three months Wednesday after China said cryptocurrencies would not
be allowed in transactions and warned investors against speculative
trading in them.

The comments sent the unit diving more than 10 percent and dealt
it another blow soon after being battered by comments from tycoon
Elon Musk and his Tesla car company.

Trading in cryptocurrencies has been banned in China since 2019
to prevent money laundering as leaders try to stop people from
shifting cash overseas. The country had been home to around 90
percent of the global trade in the sector.

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

The price fluctuations “seriously violate people’s asset safety
and disrupt normal economic and financial order”, said the
statement, which was posted to social media by the People’s Bank of
China.

The notice warned consumers against wild speculation, adding
that the “losses caused by investment transactions are borne by the
consumers themselves”, since Chinese law offers no protection to
them.

It reiterated that providing cryptocurrency services to
customers and crypto-based financial products was illegal for
Chinese financial institutions and payment providers.

Bitcoin tumbled Wednesday from $45,600 to $38,570, its lowest
since early February, and well off the record high of $64,870 seen
as recently as last month. Analysts have warned it could go down as
far as $30,000.

“This is the latest chapter of China tightening the noose around
crypto,” Antoni Trenchev, managing partner and co-founder of
London-based crypto lender Nexo, said.

– ‘Here to stay’ –
Adam Reynolds, of Saxo Markets, added that avoiding use of
cryptocurrency, which can be transferred out of the country, is
“essential to maintaining capital controls” in China.

Bitcoin has had a torrid few days. It took a heavy hit at the
start of the week after Musk appeared to suggest Tesla was planning
to sell its huge holdings of the unit. And that came days after the
electric car giant said it would halt using it in transactions
because of environmental concerns.

“Elon Musk started the ball rolling,” Germany-based crypto
analyst Timo Emden told AFP. “It will take some time for them to
recover from this shock.”

However, some Chinese enthusiasts remained unfazed.

“This has happened before and it happens every year… Crypto is
here to stay,” said trader and ex-tech industry worker Zeng Jiajun.
“I think nothing will change until big exchanges like Binance close
their businesses for Chinese users, which is unlikely to happen
since those exchanges all operate abroad.”

China is in the midst of a wide-ranging regulatory crackdown on
its fintech sector, whose biggest players — including Alibaba and
Tencent — have been hit with big fines after being found guilty of
monopolistic practices.

The central bank has also sought to promote its own heavily
regulated digital yuan, which it is testing across the country in
pilot schemes.

Consumers already widely use mobile and online payments, but the
digital yuan could allow the central bank — rather than the big
tech giants — greater data and control over payments.

— Bloomberg News contributed to this story —

AFP