China has taken one of its strongest strides ever against cryptocurrencies, saying crypto transactions are illegal. However, analysts said Beijing fell short of banning the asset and shielded bitcoin from long-term price pressure amid an ongoing pressure.
The People’s Bank of China said that, according to a translated version of its statement, Bitcoin, Ethereum, and Tether are “illegal and should not and cannot be used as currency in the market.” The PBOC said that digital currencies do not have the same legal basis as fiat currency.
But Oanda’s senior market analyst Ed Moya said in a note Friday that the government is not banning the possession of cryptocurrencies, a move that will “hit the whole crypto space”. “A ban on crypto possession would probably send crypto 20% lower,” he said.
Bitcoin initially dropped as much as 9% to approach $41,000. However, Bitcoin, Ethereum and tether managed to break away from their intraday lows on Friday at noon.
Wes Fulford, CEO of investment advisor Viridi Funds, also said that although the crypto markets were initially bearish, Bitcoin’s price response was muted compared to previous restrictions, as the news was seen as a confirmation of previous bans.
“We are seeing the prices of the crypto markets fall, but the reaction is significantly lower than previous bans as the market has already priced in the risk of China banning cryptocurrency transactions,” Fulford wrote in a note Friday. used the phrases.
By comparison, when China banned cryptocurrency mining over a weekend in June, Bitcoin fell 11%. The largest digital asset fell 7% in May when it banned banks from making cryptocurrency transactions.
Fulford said that Bitcoin, in particular, has shown resilience compared to ETH, which lost nearly 9% on Friday, or other major altcoins, including ripple, solana and dogecoin, which all fell.
The ban was expected, according to Tim Frost, CEO of Yield App, a fintech app. Anyone hoping for a comeback will be “disappointed” in the end, he said.
“China has made its intentions very clear: Like all authoritarian regimes, it wants extremely tight control over all financial activity in the country and wants zero competition for its own central bank digital currency,” he said via email on Friday.
Compared to other countries, China is several years ahead in its efforts to develop a central bank digital currency. According to the Bank for International Settlements, about 60 central banks are considering or developing digital currencies, but none of them are as advanced as China.
“Fortunately, there is currently no shortage of countries and jurisdictions adopting cryptocurrency,” Frost added. “So while the loss of the world’s most populous nation was a blow, most of the damage was done some time ago.”