1. Market Wrap: Bitcoin Stabilizes After China Crypto Ban Sell-Off; Volatility to Remain Elevated
Cryptocurrency trading has calmed, but analysts expect further volatility.
Bitcoin is stabilizing above the $40,000 support level after China’s latest crypto ban triggered immediate selling. BTC is down about 11% over the past week, compared to a 15% decline in ether over the same period. Analysts expect volatility to remain elevated given the regulatory headwinds.
Exchange tokens, especially those with a large share of Chinese users, also sold off on Friday. Huobi’s token was down about 23% over the past 24 hours and the token of FTX was down 12% over the same period.
“Around 10% of global bitcoin volumes come from OKEx and Huobi; China regulation pulled that down from 30% in 2019,” James Butterfill, investment strategist at CoinShares, wrote in a LinkedIn post on Friday. He added Friday’s crackdown should not have a major impact on crypto prices overall.
Still, some analysts emphasized the importance of China’s regulation. “At a stroke, effectively, one in seven of the world’s population is now officially frozen out of the crypto asset market,” Simon Peters, analyst at eToro told. “Until now crypto was well-established in the region, making its total exclusion a significant event.”
And regulatory pressure is nothing new to crypto markets. Analysts and traders continue to track government crackdowns, which typically occur during volatile trading periods.
“This is not the first time such an announcement has come out of China, as it had enacted similar punitive measures in 2013 and then again in 2017, following the ICO (initial coin offering) craze,” FundStrat, a global advisory firm, wrote in a report on Friday.
Latest Prices
Bitcoin (BTC), $42,426, -5.2%
Ether (ETH), $2,913, -7.3%
S&P 500: +0.2%
Gold: $1,747, +0.2%
10-year Treasury yield closed at 1.456%
China crypto crackdown
The People’s Bank of China posted a list of forbidden activities that included some previously in the gray zone of regulation, while the National Development and Reform Commission set out a plan to phase out mining entirely.
The notice banned banks and other financial institutions from offering services related to crypto. Further, regulators said they want to establish a mechanism for early warning and stopping “hype” in crypto trading and mining activities.
Crypto mining is to be deemed an “outdated” industry, according to regulators. No new projects are allowed, and existing ones will be given time to exit.
On Friday, CoinDesk’s Muyao Shen interviewed experts who said China’s latest crypto ban is its most severe action. Read more here.
Miners exit China
Miners have been fleeing China in the months leading up to the latest crypto ban. The chart below shows crypto miner migration to Kazakhstan, the U.S., Argentina and other nations.
“Kazakhstan has been one for the biggest beneficiaries of China’s long-standing adversarial approach to crypto-mining,” FundStrat wrote. “With a cost of roughly $0.03–$0.04 per kW/h (depending on the tenge-dollar exchange rate), electricity tariffs in Kazakhstan are among the cheapest in the world,” FundStrat added.
2. China’s Latest Crypto Ban Is Its Most Severe, Insiders Say
Individuals who live inside China but work for off-shore crypto exchanges can be subject to legal prosecution.
Things are getting worse for crypto in China. A comparison of China’s crypto trading ban Friday and previous crypto-related bans reveals the latest version is the most serious yet.
The People’s Bank of China (PBoC) announced tougher measures on crypto trading that, for the first time, makes illegal crypto-related transactions, including services provided by off-shore crypto exchanges.
The Sept. 24 notice bans banks and other financial institutions from offering services related to crypto, including transactions of fiat to crypto currencies, or from one crypto to another. Anyone facilitating trades is subject to legal prosecution, including those individuals who live inside China but work for off-shore crypto exchanges that provide service to China.
Those working in tech support, marketing strategy and payment and settlement will also be investigated for knowingly participating in the crypto business.
3. Cardano Announces Partnerships With Dish Network, Chainlink
The tie-up with Chainlink will allow added support for developers working on the Cardano blockchain to develop smart contracts.
Ethereum blockchain rival Cardano and TV and wireless service provider Dish Network said they’ve entered a deal to help Dish integrate the Cardano blockchain into its telecom business and help provide digital identity services to Dish customers.
Input Output, Cardano’s parent company, also said it partnered with Chainlink to help Cardano developers build smart contracts for secure decentralized finance (DeFi) applications.
The announcements were made during the Cardano Summit 2021.
After rising to as high as $2.46 earlier Saturday, the price of Cardano’s ADA token was down 0.42% over the last 24 hours at $2.28. Meanwhile, Chainlink’s LINK token was up 4.17% on the day to $24.50.
4. Art Collectors Swoon Over NFTs at Elite Basel Gathering
After a 16-month hiatus, the art world was in the mood for champagne and non-fungible tokens this week.
Ballers, bling and botox found their way to the Rhine this week as Art Basel finally opened following a 16-month delay. After the coronavirus, the art world was hungry for a good time in this quaint Swiss city. The tony event saw sales in the many millions and enough champagne to drown a small country. Princess Eugenie, daughter of disgraced British royal Prince Andrew, was seen selling canvases as global sales director of Hauser & Wirth.
The year’s buzziest art fair welcomed hoards of collectors, some on private jets, and many of them were curious about crypto for the first time. NFTs were everywhere, and collectors, clad in Margiela, moved around like culture-vulture locusts.
Art Basel doesn’t mark non-fungible tokens’ entrance into the world of fine art. Legendary auction houses Christies and Sotheby’s have moved heavily into the scene, sports stars who might be collecting Matisse are buying “PFPs.” But the presence of immutable tokens everywhere at one of the world’s most watched art functions is a sign of the times.
The Cologne- and Berlin-based Gallery Nagel Draxler sold an NFT by the crypto-artist Olive Allen (entitled “Post-death or The Null Address NFT”) for 8 ETH, about €25,000, on opening day of the fair.
5. Huobi Appears to Have Suspended Mainland Chinese New User Registration
The move came after China announced tougher measures on crypto trading.
The option of Mainland China in the country/region selection on crypto exchange Huobi’s new user registration page has disappeared following China’s announcement of tougher measure on crypto trading on Friday.
The information, first reported by Chinese crypto influencer Colin Wu, was verified by multiple people in mainland China and CoinDesk. Hong Kong, a special administrative region of China, however, remains as an option, as does Taiwan, which China disputedly claims dominion over.
A representative from Huobi said they “have no comment” on the subject when CoinDesk reached out.
“The regulatory pressure in China this time may be very high,” Wu said on Twitter. “The exchange began to react.”
Just a day ago, the People’s Bank of China (PBoC) published a notice containing vastly stricter restrictions on crypto trading, so strict that they would effectively ban it, if enforced rigorously. According to the notice, which was co-signed by ten agencies, anyone facilitating trades is subject to legal prosecution, including those individuals who live inside China but work for off-shore crypto exchanges that provide service to China.
Huobi is one of the most popular crypto exchanges among Chinese crypto users. The other two major exchanges used by Chinese are Binance and OKEx. Neither Binance nor OKEx require new users to specifically disclose their country/region on the initial registration page.
The Sept. 24 notice also bans banks and other financial institutions from offering services related to crypto, including transactions of fiat to crypto currencies, or from one crypto to another. The measure likely will target over-the-counter (OTC) services that allows Chinese to exchange their fiat Chinese yuan (CNY) into crypto assets in order to participate in crypto trading.
By press time, OTC service to exchange CNY for dollar-linked stablecoin tether is still available on Huobi. However, the prices quoted in Chinese yuan on tether by OTC traders on Huobi’s peer-to-peer (P2P) market has dropped as low as 6.26 yuan.
Under normal market conditions, the price of tether expressed in Chinese yuan should match that of the U.S. dollar’s exchange rate with the Asian currency. However, the exchange rate of US dollar to CNY is at around 6.46 yuan, at the time of writing.
A discount of the price for the USDT/CNY suggests selling pressure on the stablecoin tether, a form of cryptocurrency used to convert fiat to crypto and back again that is popular amongst Chinese, has intensified.
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September 26, 2021
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