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Bitcoin (BTC-USD) fell more than 11% Tuesday morning after China ramped up its crackdown on cryptocurrency mining.
The cryptocurrency, which in April had risen higher than $60,000, plunged to a value of under $30,000 and saw all 2021 gains disappear. It rose back up a little past $30,000 later in the morning but remained down several points from the day before.
The dramatic fall comes as China has taken steps to further restrict Bitcoin mining and trading within its territory.
China released a statement Monday relaying how it had told several major lenders and banks to "comprehensively investigate and identify" cryptocurrency exchanges and dealers in order to aid efforts to restrict trading. In the past couple of months, China has increased crackdowns on mining, creating a significantly rougher environment for the world's leading miner of bitcoin.
“A decentralized computing source, as well as distributed governance, is almost antithetical — it is antithetical — to what the Chinese Communist Party believes,” Ava Labs President John Wu told Yahoo Finance Live.
China recently restricted cryptocurrency mining in the Sichuan region, one of the country's largest crypto mining provinces. This crackdown is being carried out through the targeting of electric companies for inspection to ensure mining activity is terminated. Alipay, a Chinese online payment platform, also recently announced it would cut ties with people engaged in virtual currency transactions.
Yet Nik Bhatia, an adjunct professor at University of Southern California, noted that China's crackdown may not necessarily indicate aversion to cryptocurrency, or even bitcoin in particular.
"The Chinese Communist Party has made it known for the last several years, couple decades, that rising up to be the geopolitical superpower in the world, replacing the United States or at least being on par with the United States is their stated goal," Bhatia said. "And so when you look at the wave of adoption of bitcoin and its position as a macroasset, I do believe that China wants to be a part of that ... What I've seen from articles that have come out in Chinese newspapers, for example, is that they identify bitcoin as a potential digital gold and a solid investment opportunity looking forward into the future. We have on one side, China might be embracing Bitcoin as an investment and then the other side, they want to crack down on mining, they want to make sure that illegal trading is taken out of the marketplace and that the government has control over it. So, it's really a tale of two worlds."
He projected a multi-trillion-dollar market cap over the next few years (the cryptocurrency reached a trillion-dollar market cap earlier this year), and that price will rise accordingly. "For example, a two trillion dollar market cap of bitcoin will be about a hundred thousand dollars, so I think that's the direction that we're heading in this particular asset."
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