It looks like in Q3-Q4, 2021, Beijing is deadly serious in its anti-crypto attacks. How does it affect the segment as a whole? And why is this a story about great opportunities?
In September, 2021, People’s Bank of China (PBoC) issued a number of statements to confirm that all cryptocurrencies transactions in the country are illegal. As such, no firm or bank should deliver services to crypto-related businesses.
Despite some speakers stressing that PBoC releases such statements periodically, markets listened to this signal. All the more so because Chinese Internet watch-dogs immediately blacklisted CoinMarketCap, Coingecko, and even TradingView.
PBOC’s announcement about ban crypto got widespread today is was actually announced on September 15th, but posted online today. The market already reacted on those regulatory fud. pic.twitter.com/ecjiiK81DtSeptember 24, 2021
Also, crypto-related chats, groups and channels started disappearing from Chinese regional social media platforms Weibo and WeChat. Cryptocurrency enthusiasts are migrating to Telegram Messenger en masse, according to local sources.
CEXes down, DEXes up
China has banned cryptocurrencies so many times; crypto enthusiasts have lost count - but this ban proved to be very special. Many heavyweight centralized exchanges decided to shut down its operations in China.
Binance has banned all Chinese users from new registrations. Huobi, one of the most influential players on Asian CEX markets, announced it will leave mainland China by December. Gradually, Huobi will restrict Chinese traders from using all its services: deposits, CNY transfers, order placing, etc.
Finally, KuCoin announced that all its users from the PRC have to withdraw their assets from accounts by Dec.31, 2021. As such, this ban is the most devastating for crypto majors, let alone Tier-2 exchanges. Some of them, e.g. BiKi decided to shut down operations completely.
When miners log in to F2Pool, they are required to agree to a statement: F2Pool will not provide services to China. F2Pool unilaterally reserves the right to restrict or cancel services in specific areas. F2Pool may freeze or terminate these accounts. pic.twitter.com/SKqgCIuGgRSeptember 27, 2021
As such, traders started to migrate to decentralized finances (DeFI) protocols as the only viable alternative for trading on CEXes. Some on-chain metrics are suggesting that this process gains steam.
For instance, shortly after the latest alarming announcements by Binance and Huobi, the trading volume on dYdX, one of the oldest DeFis, added 40% overnight.
Also, total value locked in various DeFi protocols, is back to surging. In the last four days, it added 14.2%.
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Bitcoin’s fast recovery
By imposing new anti-crypto measures, Chinese authorities blow another strike against Bitcoin (BTC). Since May, 2021, the majority of them have been forced to move their mining equipment outside of mainland China. Kazakhstan, Pakistan, USA on-boarded the lion’s share of Bitcoin’s hashrate.
However, Bitcoin is recovering faster than expected. On Jun.28, 2021, it bottomed at 68 EHashes per second. Today, in early October, 2021, it recovered to almost 160 EH/s and still targets new highs.
For the first time in two years, Bitcoin's 'difficulty ribbon’ prints a ‘positive’ signal: it signifies the incredibly high miners enthusiasm.
Sometimes I think back to this and wonder how many people bought #Bitcoin then.October 3, 2021
It's up ~10x since, despite a coordinated global campaign by governments to undermine public understanding of—and support for—cryptocurrency.
China even banned it, but it just made Bitcoin stronger. https://t.co/pbnOFGfaVf
As such, even well-known Bitcoin sceptic Edward Snowden claimed that the China ban made Bitcoin even stronger.