The new year has come with a jump in the cryptocurrency market. The global cryptocurrency market capitalization is back above $900 billion, and most cryptos are trading higher than they were by the end of 2022. Amid the positive market outlook, there are speculations that China could open doors for the crypto industry again amid several friendly steps taken by the Xi Jinping administration.
Is crypto coming back to China?
Yesterday, the crypto market made a big jump on the backdrop of the positive US inflation data. As speculations grow on the possibility of the Federal Reserve slowing the pace of interest rate hikes, the crypto market is looking for the next story to spearhead a bull run. This is the possibility of China removing its crypto ban.
After three years of aggressive COVID restrictions, China is opening up again. The government is easing restrictions, and the Xi Jinping administration has also taken steps to benefit the financial markets. The crypto community is now anxious about whether the government will shift its policy on cryptocurrencies.
China banned cryptocurrencies in 2021, triggering a meltdown across the market. However, Hong Kong has never closed its doors to the buzzing digital assets space. Hong Kong regulators have focused on creating a crypto hub in the last few months.
According to Bloomberg, the growth of the crypto industry in Hong Kong has created speculation of a possible program that will allow residents in China to access the cryptocurrency market. However, this might not play out, given the negative events in the crypto industry in 2022, including the FTX fallout.
There are also concerns about the energy demands of crypto mining activities. Additionally, the speculative trading of volatile crypto assets also poses a risk to retail traders, who enter the market without proper risk management strategies.
Nevertheless, if China eases its restrictions even in the slightest, it could be the catalyst for the next crypto bull run as crypto investors will find a new story to pin their hopes on. Before the 2021 ban, China was the largest crypto market, accounting for a dominant share of crypto trading and mining activities.
Justin Sun leads hopes of crypto return to China
One of the popular names on crypto Twitter, Justin Sun, is making the crypto community more hopeful that a comeback to China is likely. Sun is the founder of the Tron blockchain. He also joined the global advisory board for Huobi, which was the largest crypto exchange in China before the 2021 ban.
When China started easing restrictions and opening up, Sun tweeted that he would be a long-term partner to the country’s success. While Sun did not mention digital assets, he is likely routing for the crypto market’s return to the country.
Despite the speculations of a possible return of the crypto industry to China, it is less likely that this will happen. Nevertheless, crypto bulls are optimistic that the easing inflation and the upcoming developments, such as the Ethereum Shanghai upgrade, will trigger the next gains.
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