China is proving that government actions anywhere have the power to destroy cryptocurrencies. It adds to a series of black eyes for Bitcoin and other cryptocurrencies.
On Wednesday the government of the second largest economy banned financial institutions from offering cryptocurrency transactions. The result was that the value of cryptos dropped like a stone.
That day bitcoin prices dove to a low around $32,000 from over $45,000 on Tuesday, according to data from Yahoo.
I wrote about the potential for just this type of action last month in a piece titled “Two Nightmare Scenarios For Bitcoin.” However, the reaction was not all good at the time.
What at least one person objected to was the idea that governments have a tendency to interfere with new technologies. Indeed, China has proved that in spades.
Cryptos Trip on Tesla
The news of China’s crypto crackdown comes hot on the heels of other snafus for the crypto world.
Earlier in the month Tesla founder Elon Musk said the company would no longer accept bitcoin payments for its electric cars. The May 12 move was an about-face for Musk who hd previously announced that his company Tesla had purchased $1.5 billion in the crypto in February.
Musk’s recent move did little to endear investors to cryptos and the price fell in the wake of the announcement.
Then there was the mess up at BlockFi, a start-up crypto lender. It accidentally sent Bitcoins to its users instead of dollars. One person received 700 bitcoins instead of $700 dollars, a recent report states. No biggie except for the fact that 700 bitcoins were worth $21 million not $700.
Apparently, some users who received the coins have returned them to the company, which recently said it had an exposure of around $1o million dollars due to the mess up, but that figure was declining as users returned more coins.
U.S. Government Clamp Down
As if everything else wasn’t enough to turn investors off to investing in cryptos the U.S. government is clamping down on investments in these digital assets. Businesses will need to report crypto transactions of $10,000 or more, and crypto exchanges will need to report inflows and outflows at a gross level.
These problems come after years in which investments in cryptos have come unstuck. They’ve been hacked, simply disappeared or the owner lost the required password.
With both the recent history and the news this month in mind, it makes you wonder why anyone would stay invested in cryptos.