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Cryptos crash as China steps up crackdown on bitcoin mining industry

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·4-min read
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A banner (designed by artists Stacey Coon, Anastasia Sultzer, and Nanu Berks) with the logo of bitcoin is seen during the crypto-currency conference Bitcoin 2021 Convention at the Mana Convention Center in Miami, Florida, on June 4, 2021. (Photo by Marco BELLO / AFP) / The mention[s] appearing in the metadata of this photo by Marco BELLO has been modified in AFP systems adding the credit of the artists who designed the banner in the background : Stacey Coon, Anastasia Sultzer, and Nanu Berk. Please immediately remove previous versions from all your online services and delete it (them) from your servers. If you have been authorized by AFP to distribute it (them) to third parties, please ensure that the same actions are carried out by them. Failure to promptly comply with these instructions will entail liability on your part for any continued or post notification usage. Therefore we thank you very much for all your attention and prompt action. We are sorry for the inconvenience this notification may cause and remain at your disposal for any further information you may require. (Photo by MARCO BELLO/AFP via Getty Images)
Bitcoin's decline comes after the flagship crypto reached a level of $41,330 on 15 June. Photo: Marco Bello/AFP via Getty Images

A sell-off in the crypto market has continued into the weekend, with the world's two biggest tokens, bitcoin (BTC-USD) and ethereum (ETH-USD), both declining further as China's crackdown gathers pace. 

China extended the clampdown on the bitcoin mining industry to its biggest bitcoin producing provinces, including the southwest province of Sichuan. 

Officials in Sichuan ordered cryptocurrency mining projects to close in the major mining centre, putting more pressure on one of the world's most vital markets for trading and mining digital currencies. 

It comes after, Chinese vice-premier Liu Hu promised last month that country would "severely crack down on illegal securities activities and severely punish illegal financial activities."

Bitcoin fell below the $35,000 (£25,341) mark on the news, crashing 7.9% to $33,596. Ethereum – the second biggest crypto by market cap – fell 9.2% to trade at $2,065. Meme token dogecoin (DOGE) dropped 12.5% to $0.26 during the session. 

The total crypto market value decreased to $1.4tn in the last 24 hours, losing nearly 8%, according to data from CoinMarketCap.

Bitcoin five-day graph. Chart: Yahoo Finance
Bitcoin fell below the $35,000 (£25,341) mark on the news, crashing 7.9% to $33,596 on Sunday afternoon in London. Chart: Yahoo Finance

The environmental impact of cryptos has been a source of much concern lately and North American bitcoin miners are working to bring transparency to their energy consumption, through the Bitcoin Mining Council.

Tesla (TSLA) boss Elon Musk also sparked a sell-off after saying the electric carmaker was abandoning plans to accept bitcoin as payment due to environmental concerns.

Read more: Bitcoin and ethereum crash as China promises 'severe crackdown'

The crypto world was knocked by several announcements in recent days as the reality of regulation spooked investors. 

Last week, Coinbase (COIN) cofounder Fred Ehrsam warned "most" cryptocurrencies and crypto-assets "won't work" and "90% of NFTs" will have "little to no value in three to five years". 

On Wednesday, the US Federal Reserve said it could raise interest rates by late 2023 on Wednesday. Assets deemed to be risky, like certain stocks and crypto, have also been weighed down by lingering concerns that the Fed may wind down its bond-buying programme sooner than expected.

On Thursday, the World Bank also rejected a request from El Salvador to help with the implementation of bitcoin as a legal tender.

The bank said it could not assist El Salvador’s plans due to the environmental impact of bitcoin mining, and transparency drawbacks.

Watch: What is bitcoin?

Meanwhile, the UK’s Financial Conduct Authority (FCA) reiterated its warning that people “should be prepared to lose all their money” if they invest cryptocurrencies.

The regulator estimated that 2.3 million adults in Britain now hold crypto assets, up from 1.9 million last year, with increasing numbers of people seeing them as either a complement or alternative to mainstream investments.

UK bank TSB is also looking to ban over five million customers from purchasing cryptos amid fears over "excessively high" fraud rates on trading platforms. "We take our obligation to protect customers extremely seriously and continually review merchants and websites with excessively high fraud rates," a TSB spokesperson said. 

TSB's move follows similar moves by other UK banks amid a crackdown on financial cyber crime. Earlier in May, Barclays (BARC.L) Monzo and Starling Bank temporarily banned cash transfers to crypto platforms such as Binance. 

Read more: Crypto retreats as bitcoin and ethereum lead mild sell-off

The decline comes after bitcoin reached $41,330 on 15 June, passing past a key $41,250 resistance area, however, it has been decreasing since. But, experts believe bitcoin's breakthrough last week could be "the start of a new bull run". 

"This could just prove to be a relief rally before the next crash as the few retail investors that managed to hold their nerve take the opportunity to sell out," said Yield App CEO, Tim Frost. "Ethereum has not followed with quite the same fever, sticking quite firmly around the $2,500 mark. There doesn't seem to be an enormous catalyst for a rally for either cryptocurrency around the corner."

According to a Bank of America survey, 81% of fund managers say bitcoin is still a bubble. The flagship crypto fell around 37% last month and its price is down 38% from its $64,829 mid-April peak.

Watch: What are the risks of investing in cryptocurrency?

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