China Continues to Crackdown on Crypto

China Continues to Crackdown on Crypto

In my almost 8 years of trading crypto, I can say with confidence that I do not recall a week so plagued by negative news around Bitcoin. It started with concerns regarding the environmental impact of Bitcoin mining raised by Elon Musk and was followed by crackdowns from China and the IRS. Today, more sanctions are being laid down by the Chinese government.

In a report published by the Chinese Government Network, Bitcoin mining and Bitcoin trading behavior are mentioned as “financial risks.” Below you can find the portion of the report that mentions Bitcoin:

The second is to resolutely prevent and control financial risks. Adhere to the bottom line thinking, strengthen the comprehensive scanning and early warning of financial risks, promote the reform of small and medium-sized financial institutions, focus on reducing credit risks, strengthen the supervision of platform enterprises’ financial activities, crack down on Bitcoin mining and trading behavior, and resolutely prevent the transmission of individual risks to the social field. It is necessary to maintain the smooth operation of the stock, bond, and foreign exchange markets, severely crack down on illegal securities acts, and severely punish illegal and criminal financial activities. It is necessary to strictly guard against external risk shocks, effectively respond to imported inflation, strengthen anticipation management, strengthen market supervision, and prepare response plans and policy reserves.”

To the Chinese government, Bitcoin is an “external risk.” Not really all the surprising for a state that prioritizes surveillance and is in the process of administering their own Central Bank Digital Currency.

How Price is Reacting

Regardless of the rationale behind China’s decision to address the risk associated with Bitcoin, the subsequent price action can be seen in the chart below:

Price rapidly dropped 10% and volume spiked. Price has now found support at the critical level of 36.6k, but Bitcoin has been taking a beating this week in terms of negative news. For the most part, the bulls seem unfazed by this plethora of negative news and seem content to buy the dip.