Much has been written on the news from mainland China where, again, some agencies and decision-making bodies have banned and / or prohibited certain entities from trading in bitcoin and other cryptocurrencies. The announcements follow several enforcement efforts targeting bitcoin miners for a range of environmental and power consumption concerns. Either way, this is nothing new, as earlier bans and decrees have also been issued by the central government in recent years.
As has happened before, these announced bans and the subsequent ripple effects have also put significant downward pressure on the price of bitcoin and other cryptos. Apart from the anxiety that such volatility can engender for some investors, it is, as for other assets, short-term noise. Bans have a long history, across geographic and economic lines, of failing in the end; if the market wants a product or a service, individuals will find a way to access it.
However, what these continued bans and enforcement actions could lead to, an increasingly forked crypto-asset landscape, but what exactly would that mean? Predictions are notoriously difficult to make, and all the more so for a field as fast and evolving as cryptography. Added to this difficulty is the fact that, even as mainland China renews its crackdown on bitcoin and other cryptos, other countries like El Salvador are considering adopting it as a medium of exchange.
Let’s take a look at some of the potential trends and directions that this push and pull in the crypto market could bring in the future.
Bitcoin is coming back to the fore. Since some of the foam was released from the latest bitcoin bull market, there have been discussions about whether or not bitcoin will retain its leadership in the crypto-asset space. Whether it’s the turnaround, the proliferation of stablecoins, new products and services such as non-fungible tokens (NFTs) that don’t work on the bitcoin blockchain, or the new entry of central bank digital currencies (CBDCs), There are a number of forces that seem to predict bitcoin’s dethronement from the top of the crypto sector.
With the trends towards centralization, however, the risks of these new products and services have become more pronounced. The decentralization and lack of central checkpoints associated with bitcoin once again demonstrates how powerful and valuable they are to the continued proliferation of crypto.
Volatility, again, is stressful but does not portend the end of bitcoin.
Price stability is coming. It may seem odd to discuss price stability, as bitcoin and other cryptos continue to exhibit significant volatility alongside both positive and negative stocks. That said, it’s worth pointing out that a component of price volatility – for crypto or any other financial instrument – is due at least in part to market uncertainty. Even headlines that are superficially negative can bring positive news in the effect of greater transparency and clarity about the directions the market will take in the future.
In other words, negative headlines actually help 1) shake up some of the more speculative holders and participants, and 2) remove some of the ambiguity that can artificially keep prices lower and / or more volatile. than they would be otherwise.
Sustainability of crypto. There has been a lot of talk, thankfully not as recently as several years ago, about the fragility or early days of the cryptoasset industry relative to other markets. It’s safe to say that the past year has seen quite a bit of developments that would – if the crypto business were really tricky – definitely deflate the industry. Even with price cuts, policy choices that don’t support the space, and various CEOs stepping in through social media, the industry continues to grow, mature and thrive.
It should be noted that even with price volatility, both upward and downward, new applications and use cases continue to enter the space on an ongoing basis. Decentralized Finance (DeFi) itself is an asset class and industry worth almost $ 100 billion on its own in terms of total blocked value (TVL). Regardless of the specific aspect of crypto examined, the durability and viability of crypto continues to strengthen even in the face of occasional negative headlines.
Trying to ban or ban any good or service desired by the market is, and always has been, an almost impossible task. Bitcoin and other crypto assets deliver tangible value to end users, continue to develop and refine the underlying networks, and continue to mature and become an integral part of the global payments infrastructure. Bitcoin is not a perfect idea, but it represents an idea, a product, a service and a platform whose time has come. Trying to artificially suppress the adoption of crypto will simply make it stronger and more sustainable in the future.