So far this week, Bitcoin has dropped by 1.78% against the US dollar, giving up part of the 7.41% gain from last week. On Tuesday, Bitcoin gained 1.40% against the greenback, recovering from the previous session's 4.59% fall.
It should not be surprising that Bitcoin markets keep suffering from strong volatility. Recently, the People’s Bank of China and a local Beijing regulator took action against a company that was providing cryptocurrency-related services.
In a joint statement released afterward, the People's Bank of China and Beijing's local financial regulator insisted that financial and payment institutions may not provide cryptocurrency-related services, whether directly or indirectly. Among the prohibited activities are marketing, promotion, and display of cryptocurrency-related products.
Previously, the Chinese government had been restricting cryptocurrency mining, trading and other services. Mining is one of the most affected activities, especially since China is attempting to become carbon-neutral and Bitcoin mining is considered detrimental for the environment, as it requires a lot of energy.
Because of this, several Bitcoin miners had to close down and move out of the country. Taking into account that the Chinese Bitcoin industry held about 70% of the world's Bitcoin production capacity, this can be considered a very serious blowout to the Bitcoin market.
Many interpret China's insistence on restricting cryptocurrencies as an attempt to get rid of potential solid competitors of its digital yuan.
”Whilst not directly affecting crypto, China clampdown on tech firms is another example of it flexing its regulatory muscles against an industry whose oversight has been lacking,” commented one of the founders of crypto lender Nexo. “Bitcoin too is caught in China’s regulatory crossfire as it’s seen as a threat to the digital yuan.”
The approach of Western governments and key market players to Bitcoin and other cryptocurrencies is still not clear. On one hand, some market actors have either expressed their willingness to offer crypto-related services to their clients or to begin receiving it as a payment method. On the other hand, Tesla (which previously had embraced Bitcoin) announced that it will stop receiving payments in Bitcoin, explaining that it made this decision because of the cryptocurrency's environmental impact.
Several key figures in the US government have either called for actions against cryptocurrency-related activities or have commented against their use. Biden's administration has already shown its ability to track crypto transactions, which has cast doubt on Bitcoin's anonymity.
Despite this, some are still enthusiastic regarding Bitcoin, both as a long-term investment and as a potential alternative to traditional fiat currencies. They argue that we shouldn't discard a comeback of the bulls’ market, which implies that the current situation should be interpreted as an opportunity to buy Bitcoin at a low price.
By 7:30 GMT, Bitcoin went up by 0.41% against the US dollar, hitting the 34,820.0 level.