Cryptocurrencies have been facing a huge drop in price and value lately, with a summer slump following a string of negative stories around the world.
In June this year, trading volumes at the largest exchanges such as Coinbase, Kraken, Binance and Bitstamp, fell more than 40 percent. According to data from crypto market data provider CryptoCompare, lower prices and less volatility are the reasons for the drop.
The month saw Bitcoin prices hit a monthly low of $28,908, according to the report, with a 6 percent low by the month end. A daily volume maximum of $138.2 billion on June 22 was down 42.3 percent from the intra-month high in May.
Most of the media reports blamed China for such an outcome. Beijing’s latest of many efforts over the years to crack down on the industry have had a greater impact than ever before. However, investors and experts in the cryptocurrency ecosystem still see a long-term positive trend for Bitcoin and other cryptocurrencies.
In the last two months, China ensured strict restrictions on the trading of cryptocurrency as it prepares to launch its own state-backed digital currency. Following this, many mining operations across provinces that earlier hosted 50 to 60 percent of all of Bitcoin’s mining power, had to slow down.
The value of major cryptocurrencies including Bitcoin, Ethereum, Cardano and Ripple fell last week after China’s Anhui province vehemently announced plans to ban cryptocurrency mining, becoming the latest region to do so as Beijing intensifies its crackdown on the industry.
The move came after Beijing in May renewed and intensified efforts to regulate cryptocurrencies in the country, citing environmental concerns and a need to preserve order and stability. In 2017, China had banned crypto exchanges and legal authorities are increasingly focusing their efforts on Bitcoin mining, the process through which Bitcoin is awarded to computers solving complex problems.
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But why are governments shying away to accept cryptocurrency? If we were to look at Bitcoin specifically, the users don’t need the existing banking system. The currency is created in cyberspace when so-called “miners” use the power of their computers to solve complex algorithms that serve as verification for Bitcoin transactions.
Their reward is a payment with cyber currency, which is stored digitally and passed between buyers and sellers without the need for an intermediary. If Bitcoin or another cryptocurrency becomes widely adopted, the entire banking system could become irrelevant.