Blockchain mania is sweeping many of the world’s leading countries as China begins to commit itself to the technology. However, President Xi’s endorsement of blockchain has not been a net positive for the cryptocurrency markets just yet. In fact, its policy of ‘blockchain, but not cryptocurrencies‘ has arguably caused Bitcoin to drop substantially this week.

Chinese Bitcoin Crackdown to Blame?

Brian Kelly, in a recent interview with CNBC, claimed that the Chinese state has taken the curious position of still banning cryptocurrency trading, which has negatively affected Bitcoin’s price. “This caused speculators to start selling… and here we are, down 16% for the week,” Kelly said during CNBC’s Power Lunch. As a result, some of the high-cost miners are at the break-even point or have begun to capitulate. This has caused even further downward pressure on Bitcoin’s price, he claims.

Institutional interest in cryptocurrencies remains high, but there are still significant obstacles. These investors are coming in, but are doing so slowly claims Kelly. What’s promising is that this year, the CFTC officially confirmed that both Bitcoin and Ethereum should be considered commodities. However, the rest of the cryptocurrency market remains in a legal limbo which scares off institutional investors.

In short, Kelly believes Bitcoin’s decline in the past week was caused by three major areas: China’s crackdown on Bitcoin, miner capitulation, and persisting regulatory issues in China and abroad.

What Comes Next?

China does not seem like it will loosen up its cryptocurrency restrictions any time soon, but it may quickly come to find its ‘blockchain but not cryptocurrencies’ party line to be nonsensical. This is because cryptocurrencies will form a crucial component of implementing blockchain technology throughout the world. Regardless of China’s ban, digital currencies can’t be banned everywhere — which means that China’s hostility to cryptocurrencies will have to falter eventually. We’re already starting to see the cracks.

Kelly’s description of a ‘digital arms race’ is similar to what BeInCrypto reported on recently: we are entering a new period of competing, state-backed stablecoins. With nations recognizing these financial instruments as extensions of their influence, cryptocurrencies will soon be embroiled in the most pressing geopolitical issues of the day.

How does this all look for Bitcoin and the cryptocurrency market in the long-term? Despite the uncertainty, what’s clear is that this industry is set to grow substantially. What consequences this growth will have on the global body politic, however, remains to be seen.

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