Bitcoin prices rebounded to $44K levels since yesterday. At the time of writing, the king crypto was trading at $44,073.61, up by 4.59% from the previous day.
Prices tumbled on the 24th after nine Chinese organizations including the People’s Bank of China and the Supreme People’s Court issued a joint statement banning cryptocurrency transactions, mining business, and virtually all related services to cryptocurrencies.
Shaken by the effect, Bitcoin temporarily fell by about $5,000. However, due to the recently repeated plunges, the derivatives market reorganized itself. And after Bitcoin stopped declining below the $ 40,000 downside support line, it suddenly rebounded with a strong short cover.
China, which has always disapproved of cryptocurrencies, has often clamped down on it, but this year’s crackdown has been one of the most powerful ones seen by the Chinese government.
In May, the government strengthened the crackdown on crypto miners. Many of the mining companies in the country, some of which had one of the largest shares of mining in the world until then, were forced to withdraw or shrink their businesses.
Since then, have been moving their activities overseas to new places such as the United States and Kazakhstan.
While the Chinese government advocates ‘national security and financial stability’ as a cause for its move, the background suggests that there were extreme conflicts of interests related to the outflow of funds and the policy of ‘joint wealth’.
Additionally, other factors include the promotion of the ‘Digital RMB (e-CNY)’, a Central Bank Digital Currency(CBDC) issued by the People’s Bank of China.
Central Bank Digital Currency (CBDC), which is being researched and developed by each country, is expected to reduce costs and improve efficiency in the current currency management and settlement system, while also protecting personal information and security by recording transactions and remittance history.
China has been aggressively conducting proof-of-concept tests ahead of other countries, while Japan is at a loss due to concerns about the impact on the United States, which holds
supremacy in the world’s key currency, the US dollar, and the traditional financial system.
In the days following China’s crackdown, the number of users of the most popular digital wallet ‘MetaMask’ and decentralized derivative protocol ‘dYdX’ in the DeFi and NFT markets has boomed.
The sudden boom suggests a transfer of funds by Chinese investors who are diversifying their assets.
According to data analysis company Santiment, the addresses of whales holding 100 to 10,000 BTC have purchased more than 80,000 BTC during the plunge, equivalent to $ 3.32 billion, on the 26th.
The market will likely be uncertain for a while, however, many believe that the immediate worst of the market is over after Chinese authorities cut the toughest cards. For the time being, it is likely that the extent of the impact, such as the selling pressure of related parties, will be closely watched.
