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A pedestrian walks past the signage for Ethereum, top and Bitcoin outside the Hong Kong Digital Asset Exchange Ltd. digital currency trading store. in Hong Kong, China on Thursday June 24, 2021.
Paul Yeung | Bloomberg | Getty Images
Bitcoin and ethereum fell into the red on Friday as traders rocked by tough talks from China.
The price of bitcoin fell 6% to $ 42,081, according to data from Coin Metrics. Ethereum, the second largest digital currency, fell 10% to $ 2,834.
It comes after the People’s Bank of China said in a question-and-answer session that all crypto-related activities are illegal. Services offering exchanges, order reconciliations or derivatives of virtual currencies are strictly prohibited, the PBOC said, while foreign exchanges are also illegal.
Beijing has severely cracked down on crypto this year. The Chinese government has decided to eliminate digital currency mining, the energy-intensive operation that validates transactions and produces new coins. This caused bitcoin’s processing power to drop sharply as miners took their equipment offline.
The PBOC has banned banks and non-bank payment institutions like Ant Group, a subsidiary of Alibaba, from providing services related to virtual currency. In July, authorities asked a Beijing-based software company to shut down over its involvement in the crypto trade.
Vijay Ayyar, Asia-Pacific head of digital currency exchange Luno, said that while China’s stance on crypto isn’t new, it was enough to tip the market into negative territory. Investors had previously been pissed off that the United States Securities and Exchange Commission has taken a tougher line on cryptocurrencies lately, he added.
“Chinese regulators have always been extreme in their opinions and these comments are not new,” Ayyar told CNBC by email. “They’ve said these things a number of times in the past. But the reaction is only interesting because we’re in a slightly nervous environment for crypto anyway with the recent SEC commentary and the overall macro environment with the news. Evergrande. So any comment of this nature will cause a massive sale of risky assets. “
“Overall, we’ve seen this happen a number of times in the past, with such declines being inorganic and bought quite quickly, especially in environments where the crypto is in a bull market cycle. Price action is wise, as long as we don’t fall below $ 38,000 on a high time basis, we are still in bullish territory. “
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