When China banned cryptocurrency mining and trading activities in 2021, it triggered a bloodbath in the market, with most tokens plunging significantly within days. China was the largest digital asset hub globally before this ban. While trading and mining activities have since recovered overseas, speculations of a crypto comeback in China could ignite the next major bull rally.
Will China trigger the 2023 crypto revival?
The cryptocurrency market has performed well in the first two weeks of 2023. Most tokens are trading higher than they were by the close of 2022. The global market cap has also reclaimed the $1 trillion mark.
The recovery coincides with the reopening of China after three years of strict COVID restrictions. The Xi Jinping administration is easing up on its strict COVID policies and adopting market-friendly rules. The changing climate is fuelling speculations over whether the Chinese government will also shift its crypto policy.
Hong Kong did not ban cryptocurrencies when China was doing so. Instead, Hong Kong has positioned itself as a hub for digital assets. There have been speculations that China and Hong Kong will create a connect program similar to the one in the stock market, allowing Chinese traders to access the crypto market through Hong Kong.
However, many do not believe that such a move will happen soon. Moreover, the regulatory climate for digital assets has rapidly changed. The fallout of FTX and several other crypto firms have made governments more watchful over the crypto markets, which could be one of the key hindrances to the return of digital assets to China.
Nevertheless, even a partial ban on cryptocurrencies in China could be good for the value of these digital assets. Right now, the country has imposed a total ban on the crypto space, even cracking down on miners that are still operating mining rigs.
The ban on digital assets led to China losing its top spot as the world’s largest Bitcoin miner. The US now stands as the largest Bitcoin miner by hash rate as miners migrated to the country. As miners shut their doors in China, so did crypto exchanges, including Huobi. Huobi was the largest crypto exchange in China before the ban.
Justin Sun, the founder of Tron and a member of the Huobi Advisory Board, has celebrated the reopening of China’s economy, pledging that he would be a “long-term partner in China’s success.” His tweet did not mention digital assets, but it triggered chatter of crypto’s re-entry to China.
Crypto bulls seem undeterred
Crypto bulls have awakened since the beginning of 2023, with almost all digital assets trading higher than they were by the end of 2022. Bitcoin has jumped by double-digits over the past week, with the coin now trading at $20,485, according to CoinMarketCap. Bitcoin is trading at around 20% higher from its weekly lows.
The recovery comes on the backdrop of positive consumer price index (CPI) data. The inflation levels in the US are easing, raising speculations about the Federal Reserve slowing down interest rate hikes.
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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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