China’s regulatory policy strengthening, Musk’s attitude change, 5.19 collapse may not be a coincidence

Several reports have mentioned the strong market impact of China’s cryptocurrency control policies.

China's regulatory policy strengthening, Musk's attitude change, 5.19 collapse may not be a coincidence

The virtual currency market collapsed on 5.19, with massive market value evaporation and many mainstream coins dropping to new highs in recent days. This article selects articles from BBC, Wall Street Journal, Bloomberg and other famous foreign media to present readers with interpretations of overseas markets.


According to the BBC, there are two main reasons why the bitcoin price fell to $34,000. First, the Internet Finance Association of China, China Banking Association and China Payment Clearing Association jointly issued the “Announcement on Preventing the Risk of Speculation in Virtual Currency Transactions”, which requires financial institutions and payment institutions not to carry out business related to virtual currencies and says that the dramatic price fluctuations of cryptocurrencies can seriously affect people’s property security. Second, Tesla announced in March that it supports customers to buy cars with bitcoin. But last week, Musk’s attitude took a big turn, saying that due to environmental factors, Tesla no longer accepts bitcoin payments, the news came out, the price of bitcoin fell by more than 10% in response.

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The Bloomberg report likewise mentions Tesla’s actions and the three associations’ announcement, which together caused Bitcoin’s plunge yesterday. However, the report also points out that bitcoin’s decline can’t be attributed entirely to the above two causes. In addition to that, leveraged players and volatility may have likewise played a part in the turmoil. The article notes that more than 700,000 traders have had their accounts liquidated in the last 24 hours, and JST co-founder Todd Moraki says that bearish news, bearish indicators and forced selling are at the root of this disaster.

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In a related report, CNBC implies that this drop in bitcoin is due to the following: China banning financial institutions from offering services related to cryptocurrency trading; a JP Morgan report showing that large institutional investors are selling bitcoin in favor of gold; in addition, Musk’s shift in attitude towards cryptocurrencies has further exacerbated this month’s pullback in bitcoin prices.

(Original link: Bitcoin)


The CNN report, on the other hand, makes it clear that China is further cracking down on cryptocurrencies, triggering a dive in cryptocurrency prices and spreading panic in the market. In addition, the article likewise mentions Tesla, stating that Bitcoin began to fall after news emerged that Musk had stopped accepting Bitcoin payments for environmental reasons. The statement from China’s three associations, on the other hand, shocked the entire crypto market. The article also details the Chinese government’s stance on cryptocurrencies in recent years.

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Forbes, on the other hand, mentions three reasons in the background statement of the cryptocurrency decline. In addition to the Chinese government’s stance and Tesla, two factors repeatedly mentioned by various media outlets, Forbes also mentions the attitude of the U.S. SEC, whose chairman Garry Gensler said in early April that the U.S. lacks a regulatory framework for crypto exchanges. In late April, the Biden administration created a regulatory framework for the cryptocurrency market.

(Original link: cryptocurrencies-ubs-warns/?sh=3ba77d35ff17)

The Times of India

The Times of India also notes that the sell-off in bitcoin has been exacerbated by the Chinese central bank’s reaffirmation that digital tokens cannot be used as payments.

Financial Times

According to the Financial Times, the precipitous fall in the cryptocurrency market is not unrelated to the Chinese government’s increased regulatory efforts. The People’s Bank of China has just issued a ban on financial institutions accepting cryptocurrency payments or offering related products and services. The ban by the Chinese government has undoubtedly added to the already panic-stricken market as the cryptocurrency market has recently become more volatile, with major mainstream coins continuing to fall.

In its announcement, the People’s Bank of China said that virtual currencies “are not real money and should not and cannot be used as currency in circulation in the market.” Some professionals say that China’s crackdown on the crypto sector is based on three considerations: 1. the central bank is preparing its own digital yuan; 2. current policies are not in place to control capital outflows; and 3. to ensure that people do not fall into scams.

In a recent Financial Stability Report, the European Central Bank pointed out that the volatility of bitcoin’s price makes it risky, and that its recent insane rise is comparable to the tulip boom and South Sea bubble events of the 17th and 18th centuries. In contrast, U.S. authorities are more open to crypto assets, with the Coinbase exchange just listed on Nasdaq and large financial institutions like Goldman Sachs and JPMorgan Chase exploring offering digital currency asset management services.

Henri Arslanian, global cryptocurrency leader at PricewaterhouseCoopers (PwC), said, “I think regulators in other countries will immediately adopt the same control policies (as China) to alert investors to the risk of shocks and speculation in the crypto market.”

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The Wall Street Journal

The Wall Street Journal, in its analysis of the strong growth of cryptocurrencies over the past year, attributed the huge speculative gains in the market to the support of various celebrities, including Tesla ECO Elon Musk, billionaire Paul Tudor Jones and rapper Snoop Dogg, whose successive entries have helped the growing cryptocurrency investment community see the dawn of a bull market. They changed the perception of early investors about bitcoin, and people began to believe that it might actually become a legitimate form of payment.

However this momentum that drove the market boom is now turning into pressure. Many newcomers only saw the growth curve of bitcoin and got involved, not realizing that the market could face a crash after the boom, and some investors’ concerns about monetary policy prevented them from being bullish about the market’s inflows in the long run, so panic spread throughout the crypto space. Now the policy restrictions by the Chinese authorities have exacerbated investors’ concerns and also proved that the crypto space is still sensitive to regulatory policies.

This dramatic market decline has parallels to the 17-year trend, where bitcoin peaked four years ago when the Chicago Mercantile Exchange opened its bitcoin futures service, which was seen as a sign of a new rally, but was the beginning of a crash. Bitcoin hit a new all-time high in April of this year, and Coinbase went public on NASDAQ. Everything was just as it was back then, and this may mark another bull market we’ve sent packing.

In response to some analysts who attribute the bull market to institutional investors, Nikolaos Panigirtzoglou, an analyst at JPMorgan Chase, has a different view. The data shows that Bitcoin’s market capitalization increased by $800 billion between September last year and February this year, but this amount of money is not considered huge, compared to the retail investors it has driven to inject more momentum into the market. In addition, institutional inflows began to taper off in January of this year, and by May, the flow changed to outflows for the first time. This also shows that institutions are quietly leaving the market and putting their investment focus back on traditional assets.

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In a report, Reuters wrote that the announcement by China’s three financial industry associations was the immediate catalyst for this market decline. While China has issued several restrictive policies on cryptocurrencies, this announcement is a step up in terms of the strength and scope of the controls. In addition, the crypto market has been under pressure since Tesla CEO Musk announced a moratorium on accepting bitcoin payments a week before the PBOC’s announcement.

A Pepperstone executive said the market’s rebound move is now too unclear to determine if there is support, and perhaps a more dramatic shakeout when Asian markets are integrated into the broader global environment.

Crypto assets continued to climb in 2021 as many institutional and retail investors believed cryptocurrencies represented by bitcoin would be embraced by the mainstream, yet along with the soaring curve, the volatility of the coin price never stopped. Bitcoin has increased 27% over the year, while this week’s single-day amplitude was nearly 300%.

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