Prices falling as domestic, global regulations tighten
The recent drop in cryptocurrency prices has not only affected investors overseas but also vendors of mining machines in Shenzhen, a city in South China's Guangdong Province and a manufacturing hub in the Pearl River Delta region.
Some Bitcoin hardware suppliers might face bankruptcy in the near future, as the Chinese authorities will further crack down on speculative activities, an expert warned.
"Our business has not been very good lately. A mining machine I could sell for 27,500 yuan ($4,343) last year has now dropped to 14,000 yuan," a vendor surnamed Yang in the Huaqiangbei market in Shenzhen told the Global Times on Sunday.
Huaqiangbei is a decades-old marketplace for electronic goods, with merchants selling everything from smartphones to LED lights. Some vendors have switched to selling mining machines, which used to be considered a profitable business.
As prices of cryptocurrencies such as Bitcoin and Litecoin soared in 2017, the mining business in Huaqiangbei attracted buyers from across China and the rest of the world, said a local businessman surnamed Liu. An Antminer S9 mining machine was priced at around 10,000 yuan on its official website, he told the Global Times, but investors "would pay as much as 30,000 yuan," he said.
The price of an S9 machine has dropped by 50 percent since then, noted another vendor surnamed Luo. "It's been getting tougher since the Spring Festival holidays," he said.
The market capitalization of all the world's digital coins stood at $310.4 billion on Thursday, down from $372.9 billion a day before, CNBC reported, citing price tracking platform Coinmarketcap.com. In addition, Bitcoin was trading as low as $7,676.5 on Thursday, the lowest price since February 8, according to CNBC.
China's central bank banned Initial Coin Offerings (ICOs), a fundraising method for cryptocurrency trading, in September 2017, and vendors at Huaqiangbei have been following policies in other countries as well.
"Many buyers of mining machines are from countries like the US and Russia," Liu said.
China is home to the world's top three producers of digital currency mining equipment - Beijing-based Bitmain Technologies Co, and Zhejiang-based Canaan and Ebang Communication - media reports said in January.
There were several reasons behind the latest drop in cryptocurrency prices, and one factor was that Google announced on Wednesday a ban on cryptocurrency ads, following a similar step taken by Facebook in January.
Also, regulators around the world have been taking a tougher stance on virtual currency trading.
"This sector is highly volatile, like the Chinese stock market," Yang said. "Our boss has a friend who became a millionaire by investing in Bitcoin, so the boss always believes that cryptocurrency prices will crawl up in April," she noted.
Crackdown on speculation
The Chinese government has been considering ways to ensure more money is invested in the real economy than in speculative activities in recent years, and it will continue to tighten curbs on risky investing, Tian Yun, director of the China Society of Macroeconomics Research Center, told the Global Times on Sunday.
"The lessons from China's stock market crash in 2015 have been learned. Domestic and foreign investors should be fully aware that opportunities for using leverage or speculative trading strategies to gain benefits will become fewer in China," he said.
The China Securities Regulatory Commission announced on Wednesday that it had fined a Chinese company 5.5 billion yuan ($870 million) for manipulating newly listed shares, the largest penalty ever handed out by the securities regulator.
The development of digital currencies should be prudent and excessive speculation must be avoided, Zhou Xiaochuan, China's central bank governor, said on March 9 at a press conference on the sidelines of the 13th National People's Congress, the Xinhua News Agency reported. [Special Coverage]