China’s Ban on Bitcoin May Have Brief Bullish Consequences for DeFi
The ban on crypto by China is the first of its kind, and a big deal for anyone in the market. China’s sweeping ban is not a death sentence for DeFi, but it does make investing more volatile. As the push against bitcoin intensifies, everyone is scrambling to survive in a changing market.
What is DeFi?
DeFi is short for decentralized finance. On a public decentralized blockchain network, this means that financial products are fully available. The help of an IT support company can help businesses and individuals better understand modern DeFi concepts. This is a different setup from CeFi and has caused a lot of conversations about its features.
Technically, DeFi is what cryptocurrency was always meant to be – without regulation, and without a middleman. The difficulty of imposing regulations on DeFi has caused a lot of scrutiny, but that is also what makes it so attractive to investors. It’s the best choice for investors that understand how to handle large amounts of cryptocurrency.
The Impact of DeFi
It didn’t take long for DeFi to start trending with powerful people of note. Mark Cuban seems to be the biggest name, at least when it comes to understanding the risk. The popular billionaire backs decentralized finance, and has both won and lost when it comes to investing in it.
DeFi is supporting by Cuban since it simplifies borrowing for all income levels. But the biggest benefit is the ability to for anyone with the means to become a lender. At its core, DeFi takes away all of the red tape that gatekeeps a lot of beginner investors.
The same individuals that can benefit from crypto are often put at a disadvantage when they first begin. CeFi is fine on its own, but it is very much a set of training wheels for anyone that is serious about investing with crypto. For the record, Mark Cuban and other high-profile investors have an interest in both CeFi and Defi.
But moving forward, the race for the best platform is DeFi’s to lose.
China’s Ban on Bitcoin
China is one of the biggest producers of cryptocurrency in the world. Changes with the rules of digital transactions happen often, but their recent ban is in a class of its own. The sweeping ban on digital asset transactions has left a lot of investors scrambling to protect their interests. This is the the fiercest ban on digital assets in history, and in mere days it has changed how cryptocurrency is traded.
For users dealing with CeFi, moving to DeFi was an easy decision. The platform saw a huge increase in trading volume that can be traced back to the original ban on September 24th. What started out as a huge shift in the industry righted itself within a week. That is the power of decentralization, and it was the biggest talking point in favor of it since the ban took place. China’s central bank still accomplished its goal by officially outlawing cryptocurrency mining and transactions. That makes America the cryptocurrency leader of the world – at least for now.
The Past and Present
This isn’t the first time China banned cryptocurrency. Since 2013, they have banned it a total of 18 times. These were more restrictions than outright bans, and as a result the industry was allowed to thrive in China. As the rise of crypto took place, several mining farms started to pop up in China. CeFi was king, and it opened the doors for a lot of small operations to make quick fortunes.
The current ban is less talk, and more action. It whipped out hundreds of millions, and has officially shut down businesses that offer trading services. This includes blocking IP addresses of current crypto users and making it almost impossible to move current digital assets associated with their cryptocurrency.
The Future
As the ban takes place in mainland China, it is also reaching out to Chinese citizens working abroad. Any work related to crypto is now illegal, and proper enforcement will come down on anyone breaking the law. How this will be handled is on a case-by-case basis, and is overall complicated depending on the individual’s location.
Although DeFi saw a massive increase in positive activity, it remains to be seen if it will last. The future is bright, but only for investors that were smart enough to diversify their digital assets. Currently, DeFi tokens are the hottest thing in the market, and shows no signs of slowing down. It also helps that a large portion of DeFi wallets are outside the reach of China’s enforcement. The key thing to take away from all of this is that ‘for now’ will be the active choice of words moving forward. DeFi is the answer, but any investor should tread carefully as China’s crypto crackdown intensifies.
DeFi Tips
DeFi is the hottest technology in the world right now. DApps and protocols are secure, and support continues to grow at a rapid pace. Since DeFi is controlled by its users, common sense investing applies here more than ever. Lending services are what started DeFi’s rise to dominance, but now that is only a small part of what it offers. Bookmark a prominent cryptocurrency news website to stay up to date with the latest news.
Any participant in DeFi that you interact with will provide a challenge. That is why any potential investor should brush up on decentralization, and always understand the latest trends in the industry. High yields are not always sustainable, and sometimes the value of a great buy does not translate to a future profit.
Like any investment, DeFi is only as high risk as you make it. A good grasp on the basics will go a long way to put you far ahead of the other investors.
Moving Forward with Skill
A ban on cryptocurrency will only have a major effect if you don’t make investment changes. Bitcoin has seen bigger challenges than this in its lifetime, and there will definitely be bigger ones in the future. To keep DeFi growing at an acceptable rate, investors have to know when to shift their weight.
This article does not necessarily reflect the opinions of the editors or the management of EconoTimes
