Cryptocurrency roundup: bitcoin shrugs off China's ban

The bitcoin price rose by almost 7% this week despite China banning virtually all cryptocurrency transactions. Saloni Sardana looks at the stories that caught our eye this week.

Welcome back, 

It was a mixed week for cryptocurrencies, with China’s ban on them still exerting a cloud of uncertainty on the market. 

Here are the top stories that caught our eye. 

Confusion persists after China cracks down on crypto

Last Friday, China ruled that all cryptocurrency transactions are illegal, which triggered much volatility in crypto markets. 

A statement by the People’s Bank of China said 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. 

A week later, firms are still scrambling to understand what this means for them. “For many companies that made big bets on crypto over the past several years – particularly companies in the tech industry – options may be limited for cashing in their holdings,” says Al Jazeera. 

Another source of uncertainty is “when the timeline for the literal cut-off date is”, New York University Professor Winston Ma told Al Jazeera. 

And Singapore is vying for any lost crypto business from China, reports the Financial Times: “The country of 5.5 million people has long relied on financial services to help power its $344bn economy, and it is now locked in an intensifying race with Hong Kong and Tokyo for the crown of global financial hub in Asia.” 

Since January 2020, crypto companies have been able to obtain an operating licence under Singapore’s Payment Services Act. 

Jerome Powell says he has “no intention” of completely banning crypto 

Jerome Powell, chair of the US Federal Reserve, said on Thursday that he has no plans to ban cryptocurrencies, but reiterated his stance that altcoins need to be subject to more regulatory oversight. 

The comments were made at the House Financial Services Committee meeting on Thursday. While the meeting’s principal purpose was to ask Powell and Janet Yellen, the Treasury secretary, about the Fed’s response to the pandemic, crypto was a dominant theme at the meeting. 

Powell’s comments come just two days after he asked for Congress to help to build the digital dollar. 

Powell likened stablecoins to market funds and bank deposits. “They’re to some extent outside the regulatory perimeter, and it’s appropriate that they be regulated. Same activity, same regulation,” he said. 

Morgan Stanley boosts bitcoin exposure 

US banking giant Morgan Stanley has actively been involved in cryptocurrencies this year, and it recently significantly boosted its exposure to bitcoin. 

A regulatory filing on Monday showed that it had increased its exposure via the Grayscale Bitcoin Trust (GBTC). 

According to the filing, the Morgan Stanley Europe Opportunity Fund owned 58,116 GBTC Shares worth $2.018m as of 31 July. This is more than double the 28,298 shares it owned at the end of April this year. 

Institutional interest in cryptocurrencies has risen this year, and greater participation by Wall Street is considered to be a key factor in propelling cryptocurrencies higher since the start of the year, helping bitcoin break an all-time high of $63,000 earlier this year. 

Morgan Stanley is not the only big player involved. Other prominent banks who have also capitalised on the crypto frenzy include JPMorgan and Goldman Sachs. 

El Salvador takes the first steps to build a “bitcoin volcano” 

El Salvador’s president, Nayik Bukele, said his country took its first steps this week to starting its “bitcoin volcano” project. 

The announcement, which was made through a Twitter post on Tuesday, shows bitcoin mining rigs being installed. 

Volcano and energy, sounds bizarre doesn’t it? Bukele first announced in June that he would ask LaGeo SA de V, El Salvador’s state-owned geothermal electric company, to come up with a plan to mine bitcoin using cheap renewable energy.

El Salvador became the first country to adopt bitcoin as legal tender last month. The move sparked mass protests, , reports the BBC. Demonstrators, fearing it would lead to “instability and inflation”, took to the streets, and set fire to a bitcoin ATM.

What initially began as a cryptocurrency experiment between two Americans at the beach town of El Zonte is now being closely watched by the world to see what happens when bitcoin becomes legal tender in a nation for the first time.

Bitcoin mining is the process by which bitcoins are created and added to the blockchain network. Cryptocurrency sceptics (often called “no-coiners”) note the high energy usage involved in mining. A study by the University of Cambridge, published earlier this year, shows the bitcoin network’s annual electricity usage exceeds that of Sweden’s, at around 121 terawatt hours

Cryptocurrency markets update

Here’s what happened in the cryptocurrency market in the last seven days:

  • Bitcoin rose 6.8% to $47,291. 
  • Ether rose 3.9% to $3,233.
  • Dogecoin fell 3.1% to $0.22.
  • Cardano fell 2.9% to $2.23.
  • Solana rose 3.3% to $153.80. 

What you need to watch out for

Ethereum network’s long-planned upgrade 

Ether’s upgrade to a proof-of-stake upgrade is happening in October. The first part of the upgrade, called Altair, is scheduled to take place on 27 October, reports Cointelegraph.

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