Trading volumes at major cryptocurrency exchanges slumped by more than 40% in June. Data from CrytoCompare shows that spot trading volumes fell 42.7% to $2.7 trillion, with derivative volumes down 40.7% to $3.2 trillion.
According to researchers, some of the factors responsible for the decline in trading volumes include lower volatility and China’s regulatory clampdown.
Last month, the world’s largest cryptocurrency, Bitcoin, fell more than 6% hitting its lowest since January, as the Chinese government increased its restrictions on bitcoin mining and trading.
It is not much of a surprise that billions are being wiped off Bitcoin’s value, thanks to China’s crackdowns. Reports in 2020 showed that China provided 65 percent of Bitcoin’s hash rate, with three main provinces making up the bulk of that computing power. These three regions, Xinjiang, Sichuan, and Yunnan seem to now be working in line with the government’s plan to curb cryptocurrency. Xinjiang has shut down a major mining hub. Sichuan has instituted a ban on mining, and the Yunnan provincial government has also reportedly told its power companies to stop making side-deals with miners.
Although China did not directly make cryptocurrency illegal in the country, it has shown strong disapprobation for cryptocurrency. In 2013, Chinese authorities banned banks from handling Bitcoin, and banned initial coin offerings in 2017, all in a bid to tighten the screws on Bitcoin.
The Chinese authorities came out with warnings about trading and mining cryptocurrencies in May, and this meant that the country’s financial giants would have to stop dealing in crypto. Since the issuance of the warnings, the top three mining regions in the country have been seen taking their stands against miners and crypto dealers. Reportedly, the Chinese authorities met with major banks recently to reiterate that banks can’t be involved with cryptocurrency transactions.
Binance, despite facing scrutiny from regulators across the world kept its position as the biggest platform by spot trading volume. Still, volumes at the largest cryptocurrency exchange platform declined by 56% in June to $668 billion.
Spurred by a decrease in demand for mining GPUs, graphic card prices in China have declined drastically, since the Chinese government’s announcement in May. The price of major cryptocurrencies like Bitcoin and Ethereum have also dropped sharply since China made it even more difficult to mine and trade crypto in the country. Bitcoin has gone from about $55,000 to around $33,000.
However, the slump cannot be blamed on China’s actions alone, as other factors like Elon Musk’s influence and the rise of NFTs have also played significant roles.