Back

Twitter vs the People’s Bank of China

20.05.2021

The vast majority of people who trade cryptocurrencies cannot remember the original Iron Curtain. 

Even the name sounds analog. Nowadays the world’s entire commercial, personal and political methodology is entirely electronic, and an entire generation likely cannot fathom why the line drawn between the free market capitalist Western world and socialist Russia and China was a metaphorical metal barrier.

Today, the Iron Curtain is back, but in a very different and very electronic form.

The People’s Bank of China today outlawed the use of various cryptocurrencies as methods of payment within China, a move that was perhaps likely, and if considered rationally, inevitable.

Despite its inevitability, huge market movements occurred during the last 24 hours across most cryptocurrencies, taking $698 billion off the values of the most popular digital assets, with Dogecoin dropping a staggering 40%, followed by Ethereum which dropped by 40% and Bitcoin tanking 30%.

There were other casualties too.

Bitcoin has been subject to a week of demises, the first caused by Elon Musk’s tweet in which he lambasted Bitcoin, a currency that he has been a loyal advocate of for a long time, stating that it uses too much electricity to mine.

It is odd that such a large percentage of market value would be removed from the previous price of Bitcoin just because of a media-seeking man who simply stated that Bitcoin would no longer be used to pay for Tesla cars.

The amount by which it dropped was more likely to be reactionary to one of the world’s richest men having made a derogatory remark about Bitcoin rather than the inability to buy a limited-market car with it. Most of the countries in which Bitcoin is very popular don’t even have a developed charging network for electric cars.

American Express doesn’t go out of business because a few merchant services terminal providers say the fees are too expensive. American Express is also subject to many signs on retail premises saying “We accept all cards except American Express” and yet nobody decides that American Express is not a valuable method of payment.

There is far more to it than the lack of opportunity to buy an electric car from Tesla. Cryptocurrency markets are very media-sensitive and are community driven. This is a very large difference between crypto and centrally-issued asset classes.

The Chinese government’s attempts to ban the use of the cryptocurrencies affected by today’s downturn is also interesting. Almost all cryptocurrency traders, investors and users would have certainly seen this coming, and China is not as large a potential market as, for example Latin America or the Middle East for sustainable implementation of cryptocurrency as purchasing tender, yet it has been absolutely blasted today.

This is certainly an interesting time – the wave of invincibility that has caused continual upward trends is now no longer one to rely on for trading crypto assets via exchange or margin platforms. We are entering the media-driven market rollercoaster.