Bitcoin sinks 11% in 30 minutes as China vows to “crack down” on “mining and trading”

Committee chaired by China’s Vice Premier calls for action on Bitcoin mining and trading

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Cryptocurrencies took a dive in mid-afternoon trading, following the publication of the minutes of Friday’s meeting of the Chinese State Council Financial Stability and Development Committee.

The meeting, presided over by China’s Vice Premier Liu He, resulted in calls for the nation’s financial system to achieve stability by serving the real economy and “to resolutely prevent and control financial risks.”

In order to achieve the latter, the Council called for the strengthening of scanning and early warning of financial risks; the reform of small and medium-sized financial institutions, an intensified focus on reducing credit risk and, of greatest concern to cryptocurrency investors and traders, a “crackdown on bitcoin mining and trading behaviour”.

Both a surprise and predictable

The call for a crackdown can be said to be both surprising and predictable. Around 75% of the world’s bitcoin mining takes place in China. The industry has become increasingly profitable in the past year as the value of the cryptocurrency has surged, providing tax revenue to the Chinese government.

The ruling Chinese Communist Party’s attitude to cryptocurrencies as a media of exchange, however, has been consistently hostile, with their decentralised nature seen as an innate threat to the state monetary monopoly.

In 2017, the Chinese government banned domestic cryptocurrency exchanges, while in 2019 the People’s Bank of China (PBoC) announced its intention to block access to all domestic and foreign cryptocurrency exchanges and Initial Coin Offering (ICO) websites.

Earlier this week, Chinese authorities banned financial institutions and payment companies from providing services related to cryptocurrency transactions, arguing that cryptocurrencies “are not supported by real value.”

Second China-triggered sell-off this week

The announcement triggered the largest cryptocurrency sell-off since the COVID-19 market panic of mid-March 2020, with bitcoin falling by almost 30% before paring losses.

The world’s first and largest cryptocurrency fell by 11.7% in the half hour following the publication of the Financial Stability and Development Committee’s minutes, briefly dipping below $37,000.

Other cryptos also suffered, with Ethereum’s ether and Ripple’s XRP falling by as much as 13% and 9.6%, respectively.

Further reading: Bitcoin rises 24% from Wednesday low

Further reading: China bans financial institutions and payment firms from servicing crypto transactions

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