Yesterday Bitcoin fell victim to a factor that has been causing its decline for several years now – negative news from China. On September 24, information appeared on the Internet that the leadership of the People’s Bank of China published new requirements, according to which any activity with cryptocurrencies, except possession, will now be officially prohibited in the country. Most interestingly, the announcement itself took place on September 15, but the rapid spread of the news just yesterday triggered a chain reaction and subsequent collapse. We tell you more about what’s happening.

Note that Bitcoin still looks good on the daily chart. The cryptocurrency is relatively close to its recent peak at $52,920, recorded in the first half of September. In addition, the chart also shows a low in the $28,805 zone, where BTC was in mid-summer.

Why Bitcoin fell

Representatives of the People’s Bank of China said that foreign cryptocurrency exchanges should not provide services to local investors on the mainland. In addition, crypto-related activities were once again called illegal.

The negativity from China had a noticeable effect on the crypto market: Bitcoin price plummeted to $40,675 and now continues to fluctuate in a narrow horizontal channel between $42,000 and $43,000. All altcoins from the top 10 in terms of capitalization also followed the main cryptocurrency downward.

UK financial regulators have no plans to ban Bitcoin in the near future.

Etherium lost a key support level at $3,000 and is now unable to consolidate above it. This scenario could potentially lead to a more protracted accumulation process and further growth of the cryptocurrency.

The market reaction was sharp, but at the same time, many cryptocurrency enthusiasts noted that the news itself should no longer surprise anyone. According to Cointelegraph, China has been actively campaigning against Bitcoin for several years now amid the development of its own central bank digital currency (CBDC).

Moreover, the total number of such “bans” on Bitcoin and cryptocurrencies has already reached 19. The first of these was recorded back in 2009, when the Bitcoin network had just begun operations. At that time, China’s Ministry of Culture and Ministry of Commerce banned the exchange of virtual assets for real goods. And so this pattern of news is about twelve years old.

This suggests that the government is gradually removing “competitors” – alternative assets that could attract the attention of Chinese investors more than the digital yuan. However, the very fact of the ban on cryptocurrency activities in the PRC should not affect the market too negatively – this year the country has lost a lot of influence on the cryptosphere, as now there are not so many BTC miners here anymore.

Moreover, given the experience of 2017, a major bull run may be ahead of us. Recall, then China also “banned Bitcoin,” after which the main cryptocurrency collapsed in price by more than 30 percent. However, after that, its value began to grow actively, and after a few months, reached a historic high at the time in the area of 20 thousand dollars.

To be fair, it’s worth mentioning another point of view. The collapse could happen due to the expiration of Deribit cryptocurrency options, i.e. their expiration. And as we already know, when this happens with derivatives, they need to be either extended or sold. In this case, the second scenario followed, which affected the cryptocurrency rate. So in the end, the news release from China was only a catalyst for the price drop, which could have been due to something else entirely.

We think that China’s cryptocurrency ban itself looks ridiculous, as this is almost the twentieth time it has happened. However, in essence, citizens can still interact with crypto-assets and are actively doing so – including using the so-called OTC market. That is, the effect of such “bans” is essentially short-term, and after a few days they are forgotten. Perhaps in the future the world will stop paying attention to such things.