Cryptocurrency crashes, China bans finance firms from servicing crypto transactions and India reconsiders crypto ban

 

19th May 2021 will be remembered as a bloodbath day in the history of cryptocurrency. The global cryptocurrency market capitalization which has been a pride for the global crypto community dipped to $1.35 Trillion from $2 Trillion in matter of 17 hours. 

Bitcoin broke the $40,000 barrier and reached $30,000 per coin before recovering to $38,000 during the day. Bitcoin's dominance however saw an increase of 3.86% during the bloodbath rising to 43.15% during the intraday trading sessions. 

USD Tether (USDT), a stablecoin that mirrors the price of the US dollar, rose from a low of $0.9991 to a high of $1.002 during the day, implying that investors turned to USDT as a safe heaven to protect their investment by selling crypto coins and buying the USD Tether. 

The crypto markets have already been hurting due to the market manipulation by Elon Musk in recent weeks and China's ban on financial institutions and payment companies from providing services related to cryptocurrency transactions added fuel to the fire.

China warned investors of the dangers of trading in speculative cryptocurrencies. China's three financial bodies; National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China issued the following statement "Recently, crypto currency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people’s property and disrupting the normal economic and financial order"

China had previously banned crypto exchanges and initial coin offerings but has not yet barred individuals from holding cryptocurrencies. The Chinese government has always been keen on asserting control over its financial system and the data comes with it and sees cryptocurrencies which is a decentralized asset and cannot be controlled by a single entity, a threat to its control over its financial systems.

However, the Chinese government is not against the idea of a digital currency. China has floated the idea of 'Digital Yuan' a digital version of its native currency. China would be able to maintain its control and assertiveness over the financial markets by issuing its own digital currency.

Recently a Chinese state-run business channel CGTN broadcasted a short video on blockchain's growth post-COVID 19 and the video featured VeChain's (an alt coin) progress in developing business solutions. This could indicate, that the Chinese government might be opposed to cryptos that are speculative in nature and might approve of alternative coins with a real world value.

India on the other hand is reconsidering its previous ban on cryptocurrency. In an interview conducted by CNBC on 5th March 2021 hosting India's finance minister, Nirmala Sitharaman. The following statement was made by the finance minister on the show: "We want to make sure that there is a window available for all kinds of experiments which will have to take place in the crypto world". In relation to cryptocurrencies she further stated that "We are not closing our minds"

With China and India being world largest and second largest country by population, their acceptance of the cryptocurrencies is very crucial for the wide spread adoption of the asset.

Today's crypto crash could lead to a market slowdown for the next few weeks until investors recover their confidence in the crypto asset.

Note: Trading decisions should not be based on the opinion in this article, investors should conduct their own due diligence before buying the cryptocurrency. This article is purely based on my own research and understanding of the cryptocurrency in the article.