By Jonathan Paglialunga, Director of Operations
Over the last several years, Bitcoin and the cryptocurrency market have taken the world by storm and revolutionized the concept of digital currency. On Friday September 25th, the People’s Bank of China (BPOC) stated that services offering trading, order matching, token issuance and derivatives for virtual currencies are strictly prohibited.
As a result of these various statements by the BPOC, the cryptocurrency market took a sizable dip with Bitcoin sinking over 6.5% in 24 hours to $41,882 and Ethereum falling 9% to $2,867. In addition, stocks that are tied to crypto saw decreases on the Nasdaq with Coinbase, MicroStrategy and Riot Blockchain falling 2%, 5%, and 6% respectively.
According to Ross Gerber, CEO of Gerber Kawasaki Wealth & Investment Management,
“The real issue is about control, and what governments don’t like is that bitcoin takes control of people’s monetary futures away from governments and places it in the hands of individuals,” Gerber said. “And that’s exactly what’s happening… globally, right now.”
Earlier this year, Beijing announced its ban on crypto mining which is a energy-demanding process that verifies transactions and mints new units of currency. As a result, there was a large decrease in Bitcoin’s processing power due to the many miners who could no longer use their equipment. Interestingly, Beijing’s goal to fulfill climate targets is at the root of China’s ban on crypto. The country is currently the world’s largest carbon emitter and aims to become carbon neutral by 2060.
In the midst of China’s crypto bans, the Communist Party of China has gradually released the Digital Currency Electronic Payment (DCEP) over the past year. The DCEP utilizes blockchain technology comparable to cryptocurrency except it is centrally controlled and operated with user data being held by the state.
Due to the large population and the cheap cost of electricity, China is the leader in crypto activity. Only time will tell how much of a hit that Bitcoin will take without its most active member transitioning out of the picture. China’s exit will create a gap that other countries like the United States will race to fill. According to U.S Senator Toomey, “China’s authoritarian crackdown on crypto, including Bitcoin, is a big opportunity for the U.S.”
According to Gerber, for private investors, Bitcoin is still a relatively small asset but, as it continues to develop, it could become a greater force in the global financial system. In the future, we will only continue to witness how both legislature and advances in technology shape the way that every individual views the currency as well as from a worldwide perspective.