Bitcoin market meltdown prompts fresh warning in China that value of world’s leading cryptocurrency could fall to zero

The global cryptocurrency industry’s latest meltdown has prompted fresh warning in China that the value of bitcoin could drop much further and be worth nothing, as Beijing renewed efforts to dissuade Chinese investors from all crypto-related activities.

An article published on Wednesday by the Economic Daily, a newspaper directly under the Central Committee of the ruling Chinese Communist Party, said investors should beware the risk of bitcoin prices “heading to zero” amid the recent decline of the world’s first and leading cryptocurrency.

“Bitcoin is nothing more than a string of digital codes, and its returns mainly come from buying low and selling high,” the newspaper said. “In the future, once investors’ confidence collapses or when sovereign countries declare bitcoin illegal, it will return to its original value, which is utterly worthless.”

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The Economic Daily’s latest write-up comes a month after it used as an example the collapse of stablecoins terraUSD and luna to justify China’s ban on cryptocurrency trading.

Bitcoin signage is displayed during the CoinDesk 2022 Consensus Festival in Austin, Texas, on June 9, 2022. The festival showcased activities of the cryptocurrency, blockchain, NFT and Web3 ecosystems. Photo: Bloomberg alt=Bitcoin signage is displayed during the CoinDesk 2022 Consensus Festival in Austin, Texas, on June 9, 2022. The festival showcased activities of the cryptocurrency, blockchain, NFT and Web3 ecosystems. Photo: Bloomberg>

The lack of regulation in Western countries, such as the United States, helped create a highly-leveraged market that is “full of manipulation and pseudo-technology concepts”, the newspaper said. It described that as an “important external factor”, which has contributed to bitcoin’s volatility.

The fresh warning from state-run media reflects Beijing’s firm stance against all cryptocurrency activities that the government has outlawed – including trading, fundraising and mining – as the global market saw popular digital tokens lose more than half their value.

Bitcoin resumed its slide on Wednesday, moving in tandem with weakening stocks amid mounting concerns about a global recession. It declined as much as 2.9 per cent to US$20,244. Ether, the world’s second leading digital token, fell 3.3 per cent to US$1,084.80.

The price of bitcoin tumbled to new low this year of US$17, 958.05 over the weekend, but posted a mild recovery to above US$20,000 on Monday. Bitcoin prices have fallen more than 50 per cent since the start of this year, while ether has dropped in value by more than 70 per cent.

Tightening monetary policies in Western economies have led to a global sell-off of a range of risk-laden assets, including cryptocurrencies, while a growing number of crypto lending platforms, hedge funds and stablecoin issuers are now mired in financial distress.

In a separate warning, the Financial Regulatory Bureau of Shenzhen said in a statement on Tuesday that cryptocurrency trading and speculation severely endanger people’s “property security”, breed criminal activities and disrupt financial order. It cautioned investors about being involved in illegal financial activities and to avoid being scammed.

The bureau cited a notice published in September last year by China’s central bank, which declared all cryptocurrency transactions illegal, singled out offshore exchanges that target mainland Chinese users and pledged to take action against citizens who market such illicit services.

Still, enthusiasts across the country are known to have found workarounds to skirt restrictions and stay active underground. That prompted the southern province of Guangdong last week to vow increased action against clandestine crypto-related activities.

On OKX, one of the world’s biggest cryptocurrency exchanges by trading volume, more than 9 per cent of its desktop web traffic on Wednesday came from China, according to data from web analytics firm SimilarWeb.

Topics related to cryptocurrencies, including bitcoin, have repeatedly become trending searches on Chinese microblogging service Weibo whenever major price drops occur.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

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