Bitcoin Drops As China’s Crypto Crackdown Continues

Bitcoin Drops As China’s Crypto Crackdown Continues

June 21, 2021 at 06:51PM

China has called together representatives from its biggest banks to reinforce a ban on providing cryptocurrency services, Bloomberg reported Monday (June 21).

The banks in question were Industrial and Commercial Bank of China Ltd., Agricultural Bank of China Ltd. and payment service provider Alipay.

“It’s the latest sign that China plans to do whatever it takes to close any loopholes left in crypto trading,” per Bloomberg.

The country’s ongoing crackdown on crypto is happening as Bitcoin fell by 10 percent — it was at $32,806 as of 11:25 a.m. EST — and Ether dropped 13 percent. Chinese regulators first banned financial institutions from providing crypto-related services in May.

“The PBOC crackdown is going further than initially expected,” said Jonathan Cheesman, of the crypto derivatives exchange FTX told Bloomberg. “Mining was phase one and speculation is phase two.”

The Chinese government put a halt to crypto mining in the province of Sichuan on June 18, as PYMNTS reported Monday.

China is responsible for more than half of the world’s bitcoin production, and Sichuan is the country’s second largest mining operation, with crypto miners migrating there in the summer to take advantage of hydropower resources during the rainy season. Mining firms will typically hold on to a large supply of cryptocurrency and large volume sell-offs trigger price drops.

With less bitcoin mining happening, scarcity should have led to a surge in prices. However, the coordinated effort of closing down mining has produced the opposite effect.

In the last six days, bitcoin has dropped by more than a fifth since its peak in April of close to $65,000. Despite the volatility, the currency has gained more than 10 percent so far this year. Ether, which ranks second in terms of market capitalization, fell below $2,000 for the first time.