The short answer, Bitcoin isn’t dead & this news itself is a repetition of the past. Yes, you heard me right. China has been known for its regular crackdowns on the crypto industry.
This time it is no different, the Chinese Central Bank has said all transactions related to virtual currencies will be considered illegal in the country. For years, it seemed the Chinese Government wanted to ban the usage of Bitcoin across the nation for obvious reasons, but this time it is more clear and boldly mentioned by the Chinese Central Bank.
One of the possible reasons could be the outflow of capital by Stable Coins or virtual assets like Bitcoin, Ethereum, Dogecoin, etc. Governments usually don’t prefer their money flowing overseas by routes other than the ones allowed by them.
On Tuesday, the Chinese Central Bank called for the shutdown of a company that was suspected to offer services related to virtual currencies. The media quickly caught up with this news & new traders started panic selling their assets in the market.
This isn’t something new for a communist government and if we look back, we have incidents in 2013 & in 2017 which show how China tried to ban Virtual Currencies in the past.
In 2013, the Chinese Government ordered payment providers to stop accepting Bitcoin as a currency. In 2017, we had the ICO boom where new companies started pitching their Altcoins in exchange for millions of dollars in funding. That I fell was a nice decision because many people actually ended up investing in Shitcoins during the ICO boom and lost a bunch of their hard-earned money.
Why in 2021?
Some people might wonder why did China all of a sudden come up with such an absurd decision? I went through some blogs and news media websites to frame some conclusions. Now before you keep reading ahead, I want to put up some disclaimers. These are all my personal opinion and I’m not a Financial Advisor, take proper risk measurement before investing.
So where was I? Why did they ban it suddenly?
In a CNBC article, I found an interesting reason. It said maybe because it is the 100th Anniversary of the Chinese Communist Party, they could be cracking down on everything that’s undesirable for themselves. This might include a crackdown on big tech firms, real estate companies, disruptive technology like Bitcoin, etc. I find this a bit weird though since banning Bitcoin today across any nation is kind of like banning the Internet back in the early 90s. You can’t ban it during a time when other nations are framing laws around it. Maybe that’s why it’s a communist state. I don’t know.
Another popular blog stated that this could be something that was pre-planned. This could be different since the previous bans on virtual currencies, kind of softened later on. Earlier, we saw a crackdown on the crypto miners where entire mining farms were taken down and crushed under road-rollers. That was terrible but it didn’t take too long for the miners to find alternate countries.
Another possibility could be the launch of CBDC’s. We all know that Central Banks across all the nations are trying their best to develop their own blockchain-based currencies. I keep looking on Twitter for Fed Coin or the Digital Chinese Yuan being experimented on a regional basis. I believe we all know Bitcoin is a threat to the Central Banks.
No one can really control Bitcoin & as time keeps passing on, it will further get even more decentralized, meaning you can’t manipulate the price of Bitcoin either. If I were a Central Bank, I would also not give up the power that I had for the last 4 or 5 decades. It seems they are trying their best to save their position which is kind of understandable.
For those of you who are coming across the term CBDC’s for the first time. It’s just a digital version of Fiat Money. It makes it even easier for the Government to track money & issue new currency or inject stimulus just by a click of few buttons. We all know somewhere that CBDC’s are garbage but it seems Central Banks are trying their best. We will all see what happens in the next 10 years.
Will Bitcoin Crash Now?
Just like any other asset Bitcoin isn’t prone to mass sell-off. If too many people sell too many Bitcoins at the same time, chances are the price of Bitcoin will tumble down. But this time, it isn’t what is happening. We all know Bitcoin can’t be banned by a single government. What China did was to prevent the conversion of the Yuan to Bitcoin & vice-versa. That means if someone in the nation has Bitcoins stored in their hardware wallet or some decentralized Wallet like Trust Wallet, he/she can still swap it with stable coins like USDT, USDC, BUSD & keep it away from the grid.
What if people sell? I don’t think that will happen personally. We all know China has a track record of banning the best investments over the last decade. We have Google, Facebook, WhatsApp, etc banned in China but are the tech giants all over the world. Bitcoin is now added to that list but there could be ways people might use it to trade the commodity.
Should you sell Bitcoin & book profits? Absolutely not. That would be the most foolish thing to do now. Historically, every time there’s a China FUD, Bitcoin first crashes and then takes off like a rocket. So you should keep holding Bitcoin against a depreciating dollar or rupee or yuan for the next 10-20 years at least. However, if you’re a day trader, I don’t think you can now have options as easily that were available before the ban. I’m not aware of that at this moment so I guess, I’m of no help to them.
Lastly, we know 50% of the people who onboarded Crypto joined in 2021. A majority of these people will panic sell & get worried about China FUD. Rest assured, if you’re a veteran, it is nothing to worry about. Keep stacking sats.