Bitcoin value drops below $40,000 due to China’s ban on use of cryptocurrencies in transaction

The value of Bitcoin dropped below $40,000 for the first time in more than three months on Wednesday, 19th of May, 2021, after China said cryptocurrencies would not be allowed in transactions and warned investors against speculative trading in them.

Trading in cryptocurrencies had been banned in China since 2019 to prevent money laundering as China aimed at stopping people from shifting cash overseas. Prior to the ban, China had been home to around 90 percent of the global trade in the sector.

In a statement by three state-backed industry associations — the National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China — it was disclosed that “cryptocurrency prices have skyrocketed and plummeted, and cryptocurrency trading speculation activities have rebounded”.

The price fluctuations “seriously violate people’s asset safety and disrupt normal economic and financial order”.  The statement was posted on social media by the People’s Bank of China.

The notice warned consumers against wild speculation, adding that the “losses caused by investment transactions are borne by the consumers themselves” since Chinese law offers no protection to them.

It reiterated that providing cryptocurrency services to customers and crypto-based financial products was illegal for Chinese financial institutions and payment providers.

This notice resulted in Bitcoin plunging from $45,600 to $39,240, its lowest since early February, which is quite far from the record high of $64,870 seen as recently as last month. Analysts have also warned that the value could go down as far as $30,000.

“This is the latest chapter of China tightening the noose around crypto,” Antoni Trenchev, managing partner and co-founder of London-based crypto lender Nexo, said.

No Comments Yet

Leave a Reply

Your email address will not be published.