China bans Bitcoin. At the beginning of the week, Bitcoin in terms of market size is at 43,800 dollars, initially well above the psychological mark of 40,000 dollars. In the slipstream of the Bitcoin recovery, the second most important currency Ether can climb again to a level well above 3,000 dollars. Bargain hunters used the latest price shock on Friday to get back in.
The Chinese central bank (Peoples Bank of China) had declared all activities around Bitcoin and Co illegal on Friday afternoon. Also for foreign exchanges, which are in connection with cryptocurrencies, the offering of corresponding services was prohibited. Accordingly, violations of the rules are to be punished rigorously.
Even if the pronounced ban had triggered price losses on the crypto markets in the meantime, China’s tough stance does not come as too much of a surprise for investors. Already in the spring, it had been announced that it wanted to take stronger action against the entire industry. Bad news from the Middle Kingdom thus has the potential to cause selling pressure in the short term, but obviously not to throw Bitcoin and Co. off track.
The concerns surrounding the financially troubled Evergrande real estate group continue to drive investors at the beginning of the new trading week. Stock market players continue to fear Evergrande’s insolvency. Even though an interest payment was made on a China bond last week, an unpaid bill of $83.5 million for an overseas bond continues to strain nerves. Overall, investors remain torn between hopes for a last-minute rescue of the group by the government and concerns about insolvency.
Twitter announced a Bitcoin payment function last Thursday, providing an interim boost to the markets. Even if this news is basically water on the mills of investors, it is somewhat drowned in view of the smoldering burden factors from the Middle Kingdom. Twitter users are thus able to transfer a kind of tip in Bitcoin to other users. However, this function is first activated for iPhone users. Android and PC users still have to be patient. This will automatically make the cryptocurrency accessible to a broader mass. It is quite possible that even more digital currencies will function as a means of payment in the future, or that more social media platforms will handle cryptocurrencies. Twitter founder Jack Dorsey is himself an investor and a big fan of cryptocurrencies. According to speculation, so-called NFTs (non-fungible tokens) could also be assigned to Twitter profiles in the future. NFTs allow digital assets to be clearly assigned to their owners via blockchain technology. Last year, NFTs worth more than one billion euros were traded around the globe.
Looking ahead to October, market participants are increasingly asking whether there could be a year-end rally similar to that seen on the stock markets in the past. Overall, however, the fundamental and technical situation is fragile. Concerns surrounding the Chinese real estate group Evergrande and the associated potential shockwaves for the global financial markets are weighing on share prices. The recently pronounced crypto ban by the Middle Kingdom could also cause temporary unrest. From a chart perspective, bitcoin is also trading below the important 200-day line, which is located at around $45,600. The stock market lights are thus still on red in the short term. In the long term, however, there is optimism among investors that the overriding upward trend since March 2020 could continue. Since the outbreak of the coronavirus pandemic in the Western world and the associated historic central banker bailouts on both sides of the Atlantic, investors have increasingly turned to alternative currencies such as crypto assets. Even if a starting shot for a year-end rally is currently not within reach, optimism could return as the bad news from China is digested.