China announced the long-awaited announcement of a complete ban on trading and mining cryptocurrencies. This resulted in an aggressive asset sell-off, which investors used as an opportunity to buy Bitcoin (BTC) in the dip. Thus, by September 24, 2021, investments in BTC had reached their highest level in four months. That’s at least what Monday’s (Sept. 27, 2021) CoinShares report claims.
What’s happening in China?
Until now, China has been one of the largest cryptocurrency markets in the world, both in terms of the number of transactions and the number of cryptocurrency mines. However, the Chinese government is constantly trying to change that. In 2019, cryptocurrency trading was officially banned in the country, however, it still continued online using foreign currencies. In June 2021, China increased the pressure on the industry and banned cryptocurrency digging altogether. A few months later, in September 2021, China issued a final statement indicating that cryptocurrencies had become completely illegal there. In the statement, the Chinese government said that those involved in “illegal financial activities” were committing a crime and would be prosecuted.
What are the implications of the Chinese market collapse?
According to a CoinShares report, Bitcoin (BTC) but also other cryptocurrencies have seen a sharp drop in price. In the case of the BTC token, the drop was 6%, to $42,000, while in the case of the ETH token it was as much as 8%. The price drop was accompanied by a sharp sell-off of assets, which represented an investment opportunity. And, as it turns out, this opportunity was exploited as much as possible.
Indeed, investments in Bitcoins reached their highest level in 4 months, with inflows equal to $50.2 million. Ether experienced inflows of $28.9 million, while Solana experienced inflows of $3.9 million. Thus, investors seized the opportunity and massively bought up assets that were “in the dip”.
It can also be expected that capital that has so far been held on centralized exchanges in China will be moved to decentralized portfolios. This trend can already be seen on the example of the dYdY exchange, whose 24-hour trading volume on September 27, 2021 increased by 163%.