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as of this afternoon the crypto market is down around 40% in the last 24 hrs.
Luckily I chose not to put in more than what I am ok with losing and intend to hold for the longer term so the recent tweets by Musk followed by the announcement by China may not be so disastrous for those of us hanging around the crypto space for the long run but for many who have jumped in trying to ride the bull run this is a heavy gut punch.
So what is behind China's actions? Well it is probably obvious to many. Crypto was designed to be an alternative to the current financial system, naturally along the way the current financial system was going to try to attack it. We have seen attempts to restrict crypto in more than a dozen countries so far generally in places where the governmental system is particularly repressive such as Iran or Egypt, or in places where a government is facing severe collapse in their currency such as Turkey.
China is a particularly big player in Crypto mining but it still fits into the first category. Just because China has had a major economic boom over the last 20 years does not make the communist party any less totalitarian. To be fair the party allowed a little more freedom to the population under the leadership headed by Deng Xiaoping. Deng was the Communist leader who carried out the reforms to take China's economy towards a somewhat more capitalist model and began China's rise.
It is a curious situation in China, made even more difficult to understand because the communist party is so secretive and closed about what goes on in much of the country. What is clear is that the current leader, Xi Jinping, is reversing the marginal relaxation on personal freedoms that were allowed during the reform and rapid growth of the past decades. Crypto may be meant to provide greater personal freedom for people's finances but new tech can also mean new control. China has implemented a social credit system which continuously grows in scale as tech becomes more ubiquitous and some estimates believe that as many as 100 million Chinese are banned from air travel due to not being in the favour of the communist party under this system, meanwhile other trademarks of totalitarian regimes such as the persecution of the Falun Gong practitioners has continued unabated during Xi's reign.
So why have China now given Crypto another kick? After all a totalitarian regime with the level of control of the CCP could have done this at any point. I believe the CCP is torn between greed and fear of threats to it's power in the country. As crypto enthusiasts know china is the largest miner of bitcoin, even though crypto is heavily restricted for normal citizens. It is clear that the CCP wants to hoard this new asset as general good practice and also as a potential financial weapon in their stand off with the west, but at the same time as the CCP is trying to get their hands on bitcoin the communist party is also developing a CBDC, leading the way in central bank controlled digital currencies. Reports of the pilots of the digital yuan suggest that part of the testing is trying out programming to have the money expire, something which gives any liberty minded person a nasty shiver.
considering how this CBDC is a control freak's wet dream it is unsurprising to see the CCP crack down on anything which may compete with it, even if it crashes the price of their own bitcoin stocks. Other issues which likely are giving the CCP a headache are reports in western media that, as of 2020 as much as $50 billion a year may be leaving china through crypto as a means of escaping CCP control or sending help to groups outside of China which may not be supportive of the regime. Of course these reports may be wrong, western media may be trying to find ways to undermine the regime and crypto is notoriously difficult to track, especially in a country as repressive as china but would it really surprise anyone if crypto was being used as a vehicle to move money without the CCP knowing?
All of this makes China's latest move unsurprising, though painful for those who jumped into crypto hoping to make fast money. I believe that this is par for the course for people who understand what crypto is designed to do. As crypto becomes more widely adopted, central authorities will try harder and harder to restrict it, the totalitarians and the countries with broken currencies are leading the charge against crypto but it will be of little surprise when less restrictive authorities feel threatened enough to move against crypto.
Thank you for reading, if you enjoyed my work then please like and do the tip thing. If there are any other events you would like me to analyse then please let me know in the comments
