Despite sharp gains on Friday, the cryptocurrency market had a calamitous week as China expanded its recent crackdown on trading. With that country apparently bent on shuttering all local buying and selling of bitcoin and its peers, the crypto market has entered a new, uncertain chapter that may last awhile longer.
Bitcoin prices rose 8 percent on Friday as a more detailed picture of China’s plans emerged. That reduced market uncertainty — always a welcome thing in the short term — but it couldn’t change the fact that the plans coming to light are ultimately bad news. For the week, even after Friday’s gains, bitcoin plunged 19 percent to trade below $3,500, its lowest weekly finish in six weeks.
Earlier this month, China had already shuttered initial offerings of new digital coins — a move that put pressure on the market. But this week, several Chinese exchanges shut down altogether, and the news site CoinDesk obtained leaked government documents directing all exchanges to do so by month-end.
The reasons for the Chinese government’s hostility to cryptocurrencies aren’t entirely clear. Officially, President Xi Jinping has said he wants to reduce speculation that could threaten overall economic stability. Some analysts believe there could be other motivations. China keeps closely controls the flow of money into and out of the People’s Republic. The unregulated, anonymous world of cryptocurrencies, which allows people to converting yuan to cryptocurrency, is potentially a big loophole in that system.
Other notable details:
- The Verge, a tech news site, estimated on Monday that Chinese exchanges had handled more than 45 percent of global bitcoin trading activity in the previous 30 days.
- Bloomberg reported that the exchange BTC China said Thursday it will immediately stop registering new accounts. Its rivals Huobi.com and OKCoin said in statements Friday that they will notify all users by Sept. 30 of the trading halt and will stop converting digital assets into yuan by Oct. 31. Huobi.com added that only yuan-related businesses will be halted, and no impact on other services.
- The week’s crypto slide gives a measure of vindication to one major Wall Street skeptic — J.P. Morgan Chase chief executive Jamie Dimon. At a conference on Tuesday, he called bitcoin a “fraud.” He also said: “It’s just not a real thing, eventually it will be closed.”