First, China decided to block ICOs, then came the shutting down of domestic bitcoin exchanges. Both bits of news have sent shockwaves through the larger cryptocurrency community around the world, and bitcoin enthusiasts in particular are wondering what will become of the most popular cryptocurrency on the globe. After all, China has been one of the largest presences in the cryptocurrency community for some time: it is home to about a third of all initial coin offerings, and its miners produce a hefty sum of new tokens every day. All of that is likely to change, however.
Exchanges Shut Down After Four Years
Chinese authorities will close down bitcoin exchanges across the country, according to Market Watch. Important to note, however, and according to Business Insider, the country will continue to allow over-the-counter transactions. This means that the total aggregate bitcoin business in the country may not be completely eliminated, but it will nonetheless probably be severely curtailed.
The price of bitcoin fell dramatically upon the news. Just over a week after bitcoin hit a fresh all-time high of nearly $5,000, the two bits of news from China have prompted a two-stage wave of price declines. The first was part of a larger, industry-wide plunge that saw many cryptocurrencies falling by 20% or more in the span of just a day. Many currencies regained substantial portions of those losses by this past weekend, only to find that the bitcoin ban caused prices to drop early in the new week.
China is home to the largest group of bitcoin miners on the planet. Some reports estimate that China’s share of total worldwide hash rate (closely linked with bitcoin production via mining) is at 71% or higher. Without access to domestic bitcoin exchanges any longer, many of the flourishing mining operations in China may close down or switch to other cryptocurrencies as a central focus. Should this happen, bitcoin production worldwide may change substantially, and the overall effect on the price of the currency is somewhat hard to say. Beyond that, according to The Verge, three of China’s main exchanges made up nearly half of all of the global market share for the trailing 30 day period up to the announcement.
An issue of secondary concern to bitcoin enthusiasts may be about whether other nations will follow China’s lead. The country’s central bank seems to have grown skeptical about the place of cryptocurrencies within the nation’s broader financial landscape. Should other countries do the same, it may spell disaster for cryptocurrencies on the whole.