Bitcoin was sent over 5% within minutes, along with all other crypto currencies as China took an even stronger position against the market on Friday. Bitcoin closed below $ 43,000 and left traders wondering what the long term effect would be.
The People’s Bank of China has gone so far as to say that services that offer exchanges and derivatives for virtual currencies are prohibited and that foreign exchange is illegal. These threats follow previous actions by the Chinese government to stop digital currency mining and have rocked the markets.
The PBOC strictly prohibits banks from providing services related to virtual currency and has shut down software companies and non-banks related to cryptocurrency trading. Analysts are mixed on the long-term ramifications for the market.
Cathie Wood swept the news and said stocks, crypto and Tesla will continue to rise over the next few months. However, most analysts believed there could be another massive sell off ahead.
The news will likely affect global banks, as traditional and new banks will think twice before offering crypto services in Asia, with the world’s second-largest economy keeping watch. A ban on financial and crypto-related businesses will lead to hesitation before expanding in the region, as the risks may be too great for the reward.
The PBOC is not the only powerful institution that has watched over and warned the cryptocurrency market. The Securities and Exchange commission also appeared to be stricter, with Coinbase having issues with its product called Lend which allegedly allowed cryptocurrency holders to earn interest like a bank. The warning was so loud that Coinbase did not follow through on its plans.
Still, with Bitcoin still above $ 43,000, the pullback leaves the cryptocurrency market with substantial gains versus the stock market over the past year. The story just might be that cryptocurrency may face major challenges and stand the test of time with powerful countries retreating even as the market continues to thrive.
The American Bankers Association will continue to weigh in on a frequent basis as the effects on the banking industry continue to be felt.