China has the largest population in the world and the second-largest economy. Its stance on Bitcoin matters. Since the inception of Bitcoin, China has negatively and repeatedly influenced the price of bitcoin on many different occasions.
The first occurred in December 2013, when the People’s Bank of China and the IT Ministry mandated all financial institutions to stop processing bitcoin transactions. Shortly after, bitcoin dropped more than 20%.
The second significant event led by the Chinese government occurred in 2017, which targeted mining operations. The decision of the Chinese regulators was a disaster for the mining industry. A significant part of local miners worked legally and brought profit to the economy.
Chinese bitcoin miners once enjoyed several competitive advantages over their rivals, such as cheap electricity and land. These factors accelerated the dominance of Chinese miners in this field.
According to the Cambridge Bitcoin Electricity Consumption Index, in 2019, Chinese miners were responsible for mining more than 70% of Bitcoins in the world. However, in recent years, China has begun to lose leadership in the mining industry. The total share in the global bitcoin mining industry has steadily declined from 75% in September 2019 to 46% in April this year due to several government restrictions.
At the beginning of 2018, the price of bitcoin faced one of the highest losses in history, falling nearly 65%. There was no apparent reason for such a crash. But several sources reported that the People’s Bank of China prepared a package of restrictions against mining, ICOs, and cryptocurrency trading both at home and abroad.
Then in August 2018 Chinese government published a document that officially banned all the activities with cryptocurrency in the country.
And once again, but this time in May 2021, the National Internet Finance Association, the China Banking Association, and the Payment and Clearing Association announced a ban on mining “to prevent the risk of agiotage in transactions with virtual currency”. The next day the price of bitcoins fell by a third — to $30,000.
Then on May 22, the bitcoin fell $5,000 in one hour — to $36,600 after a statement by the Chinese vice-premier of the State Council Liu He, who demanded stricter regulation on mining and crypto trading. As a result, the largest holders of the most popular cryptocurrency began to sell their assets, which intensified the market downturn.
The last Chinese FUD of 2021 occurred on September 20. Stock markets and cryptocurrency began to fall after the bankruptcy of one of the largest Chinese real estate companies called Evergrande. Its total debt reached $305 billion.
The situation around Evergrande is perceived as a barometer of the health of the entire Chinese market, and investors were worried about a domino effect. As a result, bitcoin fell from $47 thousand to $43 thousand, and other cryptocurrencies followed.
On September 24, China did it again! the Central Bank of China deemed all crypto operations illegal including mining, ICOs, exchanges, and transactions. After this news, the cost of Bitcoin fell by 3%, according to Binance. Many Chinese-based crypto exchanges ceased operations and relocated outside of China.
The latest ban was the most inclusive and forceful and maybe the final that we will ever hear. All in all, this ban is a good thing for the price stability of bitcoin and the crypto market. At least, investors will no longer worry about more drama coming from China. After all, Bitcoin can survive and thrive with or without China.