Why Bitcoin Could Weather China’s Tough Stance

The price of bitcoin hit its lowest point since January on Tuesday before rebounding to climb back above $32,000, as the market continued to process the impact of new mining restrictions in China. 

Cryptocurrency enthusiasts are equating Beijing’s latest crackdown setback to a rite of passage endured by Facebook and Google. Like the tech giants, they believe crypto will thrive even after being chased out of China and regain the ground it has lost over the past two months.  

“China’s acceptance or rejection of bitcoin long term is irrelevant” as long as individuals are still able to invest in the cryptocurrency, said Bill Barhydt, CEO of Abra, a crypto exchange. Barhydt said long-term crypto holders are building up their positions. 

That isn’t to say that the restrictions haven’t had a lasting impact on crypto. Though it seems like there is a constant stream of new rules and threats coming out of China, the mining edicts have real teeth. Miners will have to go elsewhere, and it could take months before we see bitcoin’s global hashrate, a measure of its mining power, return to previous levels. 

This is also a volatile market where predictions have a penchant for aging poorly. More obstacles, including further restrictions out of China, could stand in the way of bitcoin’s recovery. 

REGULATORY WATCH

Crypto was put in a less-than-favorable light during a Senate confirmation hearing Tuesday for two nominees to the U.S. Treasury Department. 

Both Brian Nelson, President Biden’s nominee for undersecretary for terrorism and financial crimes, and Elizabeth Rosenberg, his pick for assistant secretary for terrorist financing, said they would implement new anti-money laundering regulations for crypto.

Their pledge shows how some of the clearest ideas we have about crypto’s regulatory landscape in the U.S. center on digital money’s ties to illegal activities, rather than on, say, tax policy. Both Nelson and Rosenberg also emphasized that they would have to work with international partners to fight crypto crime, though the U.S.’s relationship with ransomware hub Russia is notoriously fraught. 

Still, there was one hint that regulations might not be as restrictive as previously thought. Nelson said that he still wanted to support innovation in the U.S. and not leave it to other countries. 

DEALS

• Blockchain Capital raised $300 million for its fifth venture fund from investors including PayPal and Visa. 
• Stronghold Digital Mining raised $105 million in a private equity placement. Investors included MG Capital Partners.  
• Crypto compliance company CipherTrace raised $27.1 million in a Series B funding led by Daniel Loeb’s Third Point Ventures.

WHAT WE’RE READING

• The Crypto Industry Has Racked Up $2.5 Billion in Fines Since Bitcoin Was Launched (BI)
• Fireblocks Faces Lawsuit Over Alleged Loss of $71 Million in Ethereum (Decrypt)