The crypto market cap fell by 7.32% on Thursday, dragging down ETH prices in the process.
The Ethereum to USD exchange rate fell 8.46% in the last 24 hours.
Some traders turned bearish on rumors that China would extend its ban on cryptocurrency exchanges to cryptocurrency mining as well. Doing so would devastate the network support for Bitcoin, Ethereum, and so many other blockchains.
However, these rumors are less convincing than the ones that preceded the ICO and trading bans. China had good reason to halt yuan to crypto transactions, or at least it makes a certain amount of sense within the Chinese economic framework.
You see, China regulates the amount of money that leaves its shores because it needs to keep the yuan perfectly calibrated for trade purposes.
Bitcoin and Ethereum threatened that stability by giving Chinese citizens a way to get around capital controls. And, boy, did they take advantage of that loophole.
It’s no wonder that China cracked down on exchanges that allowed those trades.
But why would the People’s Bank of China oppose cryptocurrency mining? There is no direct yuan to crypto exchange there. No loss of control. Why would it matter that some computers within the country are powering a global blockchain network?
In any case, it’s important to remember that ETH prices were up 16.9% for the week, so it’s not like there’s only bad Ethereum news. Also, Ethereum previously fell below $200.00, so the current fall doesn’t look so bad by comparison.
Despite the rational analysis, I feel fear in my gut just like everyone else.
China refuses to engage in clear and transparent oversight of cryptocurrencies. It prefers the “baptism by fire” route, which means that there’s little to no warning before a drastic policy shift.
There was no warning before the ICO ban, no warning before the trading ban—why would there be a friendly note before a potential ban on mining? That thought keeps nagging me.
Nonetheless, it seems like we will have to extend the timeline on our $1,000 Ethereum price forecast. With all the perceived downside risk shackling the market, we may only see those gains 12 months from now.