China Intensifies Crackdown On All Digital Currencies
China’s apex bank (the PBoC) has announced that it is illegal to conduct any transaction involving digital currencies. The announcement further states that it will now be easy for the bank to track crypto-related transactions, reiterating that no overseas exchange can offer crypto-related services to any Chinese. Any exchange that does so will be severely punished.
Reactions Trail China Announcement
Reacting to the news, Francine Lacqua, one of Bloomberg’s top journalists, opined that China’s latest announcement seems like a way to restrict capital outflows. In a similar vein, Gabor Gurbacs, a top-level executive with VanEck, opined via Twitter that this action would force investors to take their business to crypto-friendly regions making the Asian country lose investment inflows.
The country’s state planner also revealed detailed measures of how to ensure that crypto mining no longer exists in any state of the country. This is China’s latest move towards eradicating the use of private digital currencies by the China residents following the aggressive clampdown on crypto miners in May 2021.
Chinese authorities had earlier made initial coin offerings and crypto exchange services illegal four years ago. While most members of the crypto ecosystem usually disregard the effects of China news on the crypto space, the crypto market has often reacted to news emanating from there.
Few minutes after the news was published, BTC lost 5% and plunged to a daily low of $42,976 based on BitStamp exchange data. You’d recall that the price of the leading cryptocurrency fell sharply towards the $38k range following news of debt issues surrounding China’s real estate behemoth, Evergrande.
ETH/USD Pair Drops By 13.5%
Asides from BTC’s drop in price, ETH also dropped to $2,736 – a 13.5% loss. Despite performing poorly compared to certain altcoins, traders are selling such altcoins while retaining their BTC holdings. For example, ETH’s YTD gains are more than 270%, while BTC’s is closer to 40%. Yet, ETH experiences more dumps than BTC.
However, technical indicators predict that ETH’s performance in the upcoming sessions will be better than BTC. The second-largest digital asset has created a bull flag pattern. This pattern often develops when an asset’s price steadies or drops after a strong rally.
Hence, the maximum profit for the ETH/BTC pair on this bull flag pattern will be at the peak of the flagpole’s length. The ETH/BTC pair will be targeting a rally past its previous high of 0.0825 BTC.
Fundamental Factors For ETH Bullish Bias
ETH price is also predicted to rise since Ethereum remains the recognized leader in the nascent DeFi space. 69% of the TVL of all Dapps in the DeFi space are on the Ethereum network. As of last month, the industry’s TVL rose to $143B.
This increases the demand for ETH and, consequently, its price. Also, if holders keep locking their holdings in the token’s PoS smart contracts, supply may shrink. However, Ethereum continues to burn its ETH tokens following the adoption of its EIP proposal, with an estimated average of 13,500 ETH burned every day as of this writing.
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