China banned all crypto transactions on Friday, but experts say the move was mostly priced in for bitcoin.
Bitcoin hovered near $40,000 on Friday, a slide of around 6% in the past 24 hours, as of publishing.
China on Friday intensified its crackdown on digital assets by banning all cryptocurrency transactions, in what’s been seen as the country’s strongest restriction on the sector so far.
On Friday, the People’s Bank of China said in a statement that virtual currencies “are not legal and should not and cannot be used as currency in the market.”
They do not have the same legal standing as fiat currency, the central bank added, since they are issued by non-monetary authorities and use encryption technology.
The move came after the Asian superpower banned cryptocurrency mining and barred financial institutions from offering cryptocurrency services earlier this year.
The news sent bitcoin hovering around $42,000 on Friday, a drop of around 8% in 24 hours, according to CoinDesk data. The price of the digital asset bounced back over the weekend.
Though crypto markets initially slumped, bitcoin’s price reaction was muted compared to previous clampdowns, mainly since the news was viewed as a confirmation of previous bans, Wes Fulford, CEO at investment advisor Viridi Funds, said.
“We are seeing the crypto markets down in price, however, the reaction is significantly smaller than previous bans as the market has already priced in the risk of China banning cryptocurrency transactions,” Fulford said in a note Friday.
Fulford said that bitcoin, in particular, showed resilience compared to other cryptocurrencies, such as ether, as well as other major altcoins including ripple, solana, and dogecoin, which all fell.
While there was a substantial volume increase around the time of the news, only about 37% of the bitcoin-US dollar volume was traded in the two hours between 5 and 7 a.m. ET Friday, data from cryptocurrency exchange Bitstamp showed.
After which, prices recovered and volumes fell, Bitstamp said, indicating that the markets have largely processed the information.
“Interestingly however it is not looking like it will become a record day in terms of volume, not even in September,” Bitstamp said, adding that September 24 ended up to be the fourth-highest volume day of the month.
Memes even circulated on social media, mocking China’s move as just the latest in a string of similar moves dating back to 2013.
Bitcoin bull and Microstrategy CEO Michael Saylor took to Twitter to question the move as well.
“Nothing has created more wealth in the past decade than technologies banned in China.”
For Tim Frost, CEO of Yield App, a fintech app, the ban was expected. Anyone who was hoping for a reversal, he said, will just end up “disappointed.”
“China has made its intentions very very clear: Like all authoritarian regimes, it wants extremely tight control over all financial activity in the country, and it wants zero competition for its own central bank digital currency,” he said via email Friday.
Compared to other nations, China is several years ahead in its efforts to develop a central bank digital currency. Around 60 central banks are developing or considering issuing digital currencies, according to the Bank for International Settlements, but none have advanced their plans as far as China has.
“Thankfully there is no shortage of countries and jurisdictions that are now embracing cryptocurrency,” Frost added. “So while the loss of the world’s most populous nation is a blow, most of the damage had been done some time ago.”
By Isabelle Lee @ Insider International