Impact of Chinese Crypto Ban on Cryptocurrencies
Cryptocurrency continues to make the news globally. While some buy into the idea of investing in it, others don’t see a future in it. However, regardless of what you believe, one thing is certain – cryptocurrencies like Bitcoin, Ethereum, Litecoin, and Dogecoin have all come to stay.
Digital currencies have been faced with several challenges since they were created. It started with the issue of insecurity and the many activities of hackers and crackers. Now, we have several government regulations that threaten the existence of virtual currencies. The most recent of these regulations is the ban placed on cryptocurrency by the Chinese government.
What does this ban say about the fate of those who want to invest in cryptocurrency? How does this ban affect Bitcoin price and Litecoin price globally? What is the way forward for players in the cryptocurrency market who want to buy Litecoin? All these questions and more come to mind regarding the impact of the Chinese ban on cryptocurrency.
China as the Epicenter of Bitcoin Mining
For many years, China played a major role in the cryptocurrency world as the center of Bitcoin mining. However, on the 24th of September, 2021, the Chinese government announced a ban on cryptocurrency activities. It also went further to declare illegal every crypto-related activity. The announcement brought about a major drop in the price of Bitcoin by a massive 10%. Beyond the impact this ban has on Bitcoin, we have also seen how it affects the value of other coins like Litecoin.
Generally, the cryptocurrency market is moved by major news like this. As such, you won’t be surprised when the prices of other coins start dropping. Bitcoin is a major coin, and anything that affects it can have a ripple effect on other virtual currencies.
All of these bring to mind an essential question – what effect does the Chinese crypto ban have on cryptocurrencies?
Effect of Chinese Crypto Ban on Cryptocurrencies
Since the Chinese government announced the ban on cryptocurrency-related activities, several doubts have been cast on the future of digital currencies. To many, they are starting to lose trust in crypto investment. However, beyond the sharp drop in Bitcoin and Litecoin price occasioned by the ban, what are other effects on cryptocurrencies?
- Mining activities will be reduced.
As earlier pointed out, China is central to Bitcoin mining. Research has it that most of the world’s cryptocurrency mining activities of major coins like Bitcoin, Ethereum, and Litecoin occur in China. With this ban making cryptocurrency mining illegal in China, it is expected that there will be a massive decline in crypto mining activities.
While some mining activities are recorded in the United States, it only accounts for about 16% of all done in the cryptocurrency market. It is, however, projected that some crypto-mining migration will take place to see Bitcoin mining activities resume in new places, especially in the United States.
The value of cryptocurrencies will decline.
Cryptocurrencies are generally valuable only to the degree people are interested in them. With this official announcement, we have seen many traders selling their crypto holdings. It has also made the cryptocurrency market unattractive to potential investors. The high volatility of the cryptocurrency space is already a challenge for many to deal with.
No one wants to add the possibility of their transactions becoming illegal because the government of the day says so. Unfortunately, it is not only Bitcoin that is affected by the ban. Since the announcement, we have seen a drop in the value of Ethereum, not so many people want to buy Litecoin, and the discussions around Dogecoin aren’t as they used to be.
Interestingly, reports have it that major cryptocurrency investors are figuring out how they can look into the issue and salvage the situation before it causes more damage to other coins like Ethereum and Litecoin.
Miners will be out of jobs.
Many people make a lot of money mining cryptocurrencies. Sadly, it was reported that over 10,000 computers were seized in some parts of China and many others damaged. Crypto miners who make a lot of money from Bitcoin mining will no longer do what they do. Instead, they would have to consider alternative means of livelihood outside cryptocurrency, which is now deemed illegal.
In conclusion, China used to be the central powerhouse for cryptocurrency activities, and with this crypto ban, a lot has and will be affected in the market. However, if there is anything worth learning from this action by the Chinese government, it will be the need for investors to consider crypto-mining migration. Instead of concentrating on cryptocurrency activities in one place, investors should consider looking into other promising countries and places. That way, a ban in one place will not bring about a total down of shutdown crypt activities.
Impact of Chinese Crypto Ban on Cryptocurrencies