Why China Banned Bitcoin from the Perspective of the Impact of Sino-US Competition on Cryptocurrency

Since 2018, the sweater war between China and the United States has been launched. As of 2021, it has lasted for more than three years. From the initial blockade of high-end technology to the continuous over-issuance of US dollars by the Federal Reserve, to the price increases of bulk commodities such as crude oil, steel and ore, and even a bowl of noodles at daily necessities stalls, everything has begun to increase in price. Inflation has been transmitted from the upstream to the downstream. The impact of the sweater war has touched all aspects of our lives and is closely related to everyone.

There are actually deep connections behind why China is cracking down on cryptocurrencies. In this video, Xiaoquan will talk about it.

One of the essences of cryptocurrency is still currency. No matter what kind of blockchain technology it is born from, whether it is issued by a centralized exchange or a decentralized exchange, it cannot escape the influence of the exchange rate with legal currency. To be more precise, cryptocurrency is still an economic product under the system of US dollar endorsement, which means that cryptocurrency is firmly tied to the US dollar and can be used as a sickle to harvest assets of other countries at any time. This is also the reason why investment institutions such as Citibank and JPMorgan Chase in the United States have laid out the cryptocurrency market.

A big reason why China does not accept cryptocurrencies is because they are too closely tied to the U.S. dollar. Today, in the context of the Sino-U.S. sweater war, cryptocurrencies are used by many merchants engaged in the import and export of sweaters as the equivalent of payment for industrial product transactions. Ordinary industrial products continue to flow out of China without supervision, but the U.S. dollar foreign exchange reserves in exchange cannot be exchanged for scarce commodities in time due to the U.S. economic blockade. The foreign exchange reserves are likely to be diluted and depreciated at any time.

Looking back at the relevant policies regarding the sweater war in the past three years, a similar thing actually happened in Yiwu last year. Under the influence of the epidemic, cheap foreign bulk commodities could not be imported, while a large number of industrial products and daily necessities were continuously exported. The foreign exchange reserves in US dollars in exchange could only be kept in the central bank, and the United States only needed to keep printing money to easily exchange for the goods produced by China with real gold and silver. Therefore, it was no surprise that the large-scale power outages in Yiwu factories still restricted production in the name of environmental protection, and restricting production controlled exports.

Throughout history, the exchange between countries has always been centered around exchange rates and foreign exchange reserves. So how do ordinary people view cryptocurrencies? We have to start with the fundamental relationship between China and the United States.

Assume that several situations occur.

1. The Sweater War ended with the victory of the United States, the US dollar appreciated, and the US dollar hegemony continued to reap the assets of other countries. At this time, holders of cryptocurrencies can be exchanged for US dollars at any time to enjoy the dividends of the appreciation of the US dollar, while avoiding the risk of depreciation of the RMB.

2. The sweater war ended with China's victory. The RMB appreciated and became the second largest international currency after the US dollar. With the launch of CNYT, a token similar to USDT by institutions like Tether, the cryptocurrency market started a bull market again. Those who hold cryptocurrencies can enjoy the dividends of the market rise and avoid the risk of depreciation of the US dollar.

3. The sweater war continues in its current state. Holding cryptocurrencies itself carries the risk of inflation, and we are waiting for changes to occur.