For those well-versed in the world of crypto, a Chinese crypto ban has almost become a right of passage, with one seemingly popping up every four years.
China banned different cryptocurrency-related activities in 2013, 2017 and again now in May of 2021.
What does the new Chinese crypto ban entail?
As of 24 September 2021, the People’s Bank of China said that all crypto-related activities are illegal, including services such as trading digital assets, order matching, token issuance and derivative trading. In addition, overseas crypto exchanges providing services in mainland China are also illegal activities and must be immediately halted.
Why does China want to ban crypto?
A ban, by definition, can only be done once. Every ban thereafter just shows an inability to stop it in the first place.
Due to crypto’s peer-to-peer design and decentralised nature, Bitcoin, and in turn cryptocurrencies, are clearly difficult to ban. After issuing its fourth ban on cryptocurrencies and related activities, China is definitely finding this the case.
It’s no surprise why China would want to outlaw such an invention. The Chinese have always enjoyed a top-down, centralised currency that they can control. This type of control is the exact opposite of what Bitcoin, and many other cryptocurrencies, are trying to achieve, as it stands for decentralisation and individual human choices outside the control of governments.
Secondly, the Chinese government is looking to release its digital yuan — a central bank digital currency. This ban could be just in time to reduce the digital yuan competitors and allow for the central bank to control money flows at an even more efficient level using blockchain technology.
What effect will this ban have?
While it is tough to know the full effect this ban will have on the cryptocurrency market, history and current price action seem to be favouring the side of “a non-event”.
China has been at the forefront of banning multiple tech innovations throughout the years, but that hasn’t stopped these companies from taking over the world we know today. Twitter, Facebook, Google and some of the most used services in the world today all have something in common: they have all been banned by China at various times.
“Actually, Chinese technology bans have proven to be quite a good buy signal,” says Brett Hope Robertson, Investment Analyst at Cape Town-based crypto investment platform Revix.
“When looking at returns, we see Chinese bans on disruptive tech do little to stop them from becoming one of the best investments of the internet age,” Robertson continues.
Google and Facebook have gone on to become the third and sixth biggest companies in the world. While history doesn’t repeat, it does often rhyme, and these Bitcoin bans might just show the world how important this cryptocurrency could become.
How did the market respond to the ban?
The recent Chinese ban on cryptocurrencies might be the harshest one yet regarding outlawing cryptocurrencies from China altogether. Yet, ironically, it has been accompanied by the most subdued reaction in Bitcoin’s price out of all of the previous bans.
We can see that not only was this a smaller reaction, but for the time being, it seems it has only taken one day for the bottom to be locked in.
Is this time different?
In the world of investing, muttering the words “this time is different” is usually seen as a financial faux pas. Finance believes in cycles, history and patterns — therefore believing that this time is somehow different usually ends up in you being wrong.
While this time may look different, it’s much the same. A Chinese ban has impacted the price of cryptocurrencies, only to soon recover.
Yet, unlike the previous bans, it seems the market hasn’t responded much at all. It appears the market is viewing China as the country that cried wolf too many times, or even better, it just doesn’t appear to be phased about China outlawing cryptocurrencies at all.
Either way, this could be the first time we see immediate resistance from the cryptocurrency market, which shows the true strength of crypto.
Where is the money flowing next?
Interestingly, after the China news caused a pullback in prices, money has been flowing into many decentralised exchange cryptocurrencies such as Uniswap (up +30%) and Sushi (up +23%).
This is because Chinese traders are now looking for new ways to gain access to cryptocurrencies, and they have found it through decentralised exchanges where users don’t need to pass any KYC/AML checks to verify an identity or adhere to any stringent regulation.
Other smart contract enabled blockchains have shown strength as many decentralised apps are built on top of them. The likes of Polkadot was up +7% from China’s pullback lows.
Where can I get exposure to decentralised exchanges and blockchains?
Cape Town based crypto investment platform Revix, which is backed by JSE listed Sabvest, offers access to Polkadot, Uniswap, Solana, Cardano and Ethereum — all the cryptocurrencies that have benefitted from the Chinese crypto ban.
On their platform, you can also buy Bitcoin and ready-made “Crypto Bundles”. Their crypto Bundles enable you to effortlessly own an equally-weighted basket of the world’s largest and, by default, most successful cryptocurrencies without having to build and manage a crypto portfolio yourself. They’re like the JSE Top 40 or S&P 500 but for crypto.
You can get started with as little as R500. Sign-up is quick and effortless, and you can withdraw your funds at any time.
Head over to www.revix.com to learn more.
Revix brings simplicity, trust and great customer service when investing in cryptocurrencies. Its easy-to-use online platform enables anyone to securely own the world’s top cryptocurrencies in just a few clicks. Revix guides new clients through the sign-up process to their first deposit and first investment. Once set up, most customers manage their own portfolio but can access support from the Revix team at any time.
Remember, cryptocurrencies are high-risk investments. You should not invest more than you can afford to lose, and before investing, please take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.
This article is intended for informational purposes only. The views expressed are opinions, not facts, and should not be construed as investment advice or recommendations. This article is not an offer, nor the solicitation of an offer, to buy or sell any cryptocurrency.
To learn more, visit www.revix.com.