China Says Goodbye to Crypto

Is it over for cryptocurrency?

By Darryl Weng

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Just yesterday, China officially declared the circulation of cryptocurrencies as illegal. The immediate effects on cryptocurrencies were evident. According to a recent Wall Street Journal(WSJ) report by Elaine Yu and Joe Wallace, Bitcoin “fell more than 8%” from the price on “5 p.m. ET Thursday, before paring some of those losses.”(Yu and Wallace)* Other cryptocurrencies mentioned by the WSJ report like Ether dropped at similar or worse rates. To add on more devastating news for cryptocurrency in the stock market, SEC’s Gary Gensler recently announced the need for cryptocurrency regulations. It seems as though cryptocurrencies may not be the money makers they used to be.

Although the recent crackdown on cryptocurrencies may have done substantial damage to them, the reasons and motives behind the crackdown are nothing new. Since a year ago, concerns of cryptocurrency serving as a realistic form of currency or network of transactions were valid. Investors predicted that cryptocurrency, especially that of Bitcoin, would lose volatility and either be stable or increasingly lose value. However, cryptocurrencies like Bitcoin continued to fluctuate, if not peak quite a few times. Even when India, China, and the EU sought alternatives to using American cryptocurrency or cryptocurrency as a whole, cryptocurrencies did not fall in value to even make serious headlines.

Even now, when China became the first country in the world to ban cryptocurrency, Bitcoin still soars over ten thousand dollars above its price back in July. China may not be the last country to ban cryptocurrency, but China is a major miner of cryptocurrency and brought Bitcoin’s price nowhere near its year low. Any other country willing to ban cryptocurrency would not be able to parallel the effect China had on cryptocurrency. Unless, however, the U.S intends to ban cryptocurrency, which is, of course, far likely to happen. Even if Gensler’s push to regulate cryptocurrency succeeds, the effects will not last.

Thus, cryptocurrency is neither crashing nor failing. Rather, it still stands as one of the best investments for this year and onwards. A common misconception among various Bitcoin’s analysts and investors is that Bitcoin’s value is based on Bitcoin’s practicality and use. If Bitcoin’s value were to exemplify Bitcoin’s practicality, Bitcoin would be worth far below today’s value. Such stocks that do not characterize correlation between value and usage are swarming the markets. For instance, BlackBerry’s stock does not have the slightest reaction to BlackBerry’s performance as a company. Even when BlackBerry Limited shifted gears to a more profitable industry and secured a prominent deal with Amazon, Inc., investors did not react by pushing BlackBerry’s stock up. Cryptocurrencies, just like BlackBerry, are examples of a new breed of stocks in the market that simply don’t follow the traditional predictions of stock movement. Cryptocurrencies may be risky, but they are far from falling out of many investors’ favor.

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Yu, Elaine, and Joe Wallace. "China Declares Cryptocurrency Transactions Illegal; Bitcoin Price Falls." Wall Street Journal, 24 Sept. 2021, www.wsj.com/articles/china-declares-bitcoin-and-other- cryptocurrency-transactions-illegal-11632479288. Accessed 25 Sept. 2021.