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The cryptocurrency world was as busy as ever this week with China cracking down even harder on the market, and the Evergrande crisis rattling global markets – including cryptocurrencies.
Most major cryptocurrencies suffered dramatic falls and remained in a sea of red after a slew of adverse news.
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Here are the top stories that made headlines this week.
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China makes all cryptocurrency transactions “illegal”
On Friday, China intensified its crackdown on the cryptocurrency sector, by dubbing all cryptocurrency transactions as “illegal’. What this means remains to be seen, but the crypto market did not welcome the news, with bitcoin falling almost 6% in an hour alone, and ether lost 8%.
The statement by the People’s Bank of China added that all cryptocurrencies, including both tether and bitcoin, do not represent fiat currency and cannot be traded on the market. China’s government will "resolutely clamp down on virtual currency speculation, and related financial activities and misbehaviour in order to safeguard people's properties and maintain economic, financial and social order," it said.
Friday’s announcement is only the latest attempt to curb crypto activity. In recent months, China has banned cryptocurrency mining – China’s mining activities accounted for 65% of total global mining.
Evergrande drags cryptocurrencies down with the wider market
This week, news that Evergrande, one of China’s biggest property developers, is in financial distress and missed a key bond payment sent shockwaves across all financial markets, with cryptocurrencies no exception. Evergrande missed a $83.5m coupon payment on Thursday, even though it initially looked like the real estate firm was able to come to an agreement with bondholders that prevented it from defaulting on its obligations.
Crypto markets shed around $250bn in value as the Evergrande jitters prompted steep falls. Analysts said that investors were scrambling to liquidate their cryptocurrency funds due to fears on how the crisis will affect global markets.
But why would crypto markets suffer as a result of this? As James Butterfill, investment strategist at CoinShares, says: "There are a lot of Chinese holders of crypto. Now if there's some sort of significant economic malaise, or big sell-off, people will be looking for liquidity, looking for things to sell – and bitcoin being very liquid, it will be easy to sell.”
Robinhood to launch a cryptocurrency wallet
Robinhood Markets, the poster child of the rise in retail investing, is due to launch its long-awaited cryptocurrency wallet next year. While many platforms provide trading opportunities for customers, not all of them provide cryptocurrency wallets.
The first step will be an alpha test of its programme in October. Once that is done, the firm plans to give a limited number of users access to the app.
Robinhood joins rivals Coinbase and Gemini who already offer their customers cryptocurrency wallets.
What is unclear is whether the provision of crypto wallets will help the company, whose reputation has been beset by one scandal after another due to its role in the GameStop saga earlier this year.
Cryptocurrency markets update
Here’s what happened in the cryptocurrency market in the last seven days:
- Bitcoin fell 13% to $41,397.
- Ether fell 21% to $2,800.
- Dogecoin fell 16% to $0.21.
- Cardano fell 11% to $2.13.
- Solana fell 13% to $132.
What you need to watch out for
Evergrande
It is worth keeping an eye on how the Evergrande crisis unfolds. Any government bailout or help from the Chinese government could be bullish for the crypto market. "If we see a government bailout and (the contagion) is very well contained I think we will see quite positive price momentum for bitcoin, so, until we have that kind of uncertainty clarified about Evergrande on Thursday, I think it'll just tread water for now," Butterfill said.
Ethereum’s “Layer 2” upgrades
By the end of the month, Ethereum is planning to implement two new “optimistic rollups”, which speed up the way smart contracts pass data from one network to another. The two upgrades are called Optimism and Arbitrum, respectively.
