Bengaluru: Earlier this week, the price of Bitcoin dropped below $30,000 for the first time since January, after hitting an all-time high of almost $65,000 in mid-April.

While Tesla chief executive Elon Musk's tweets are one of the reasons for this price dip, another major reason is China's massive crackdown on the digital coin and cryptocurrencies in general.

The country has always had a firm stance against cryptocurrencies. Back in 2013, Chinas central bank had barred financial institutions from handling Bitcoin transactions when the price of the digital coin jumped from $100 to $1,000 within a few months. It had also banned fundraising through initial coin offerings and shuttered domestic Bitcoin exchanges in 2017.

In May, Chinese Vice Premier Liu He and the State Council issued a warning saying it was necessary to crack down on Bitcoin mining and trading behavior, and resolutely prevent the transmission of individual risks to the social field.

This was after three Chinese state-backed financial associations raised concerns about risks emerging from the volatility of cryptocurrencies, and directed their members including banks and online payment firms to not provide any cryptocurrency-related services.

Crypto miners shut down

Soon after the government warning, several cryptocurrency miners including HashCow and BTC.TOP halted all or part of their China operations last month. This had huge ramifications since Chinese miners reportedly account for as much as 70% of crypto mining worldwide.

Earlier in June, Weibo, Chinas version of Twitter, blocked several prominent crypto-related accounts, saying each of them violates laws and rules.

On Monday, China's central bank The Peoples Bank of China (PBOC) also met with several domestic banks and payment firms such as Alipay, urging them to tighten restrictions on cryptocurrency trading and directing them to stop facilitating cryptocurrency transactions. These institutions must also comprehensively investigate and identify crypto exchanges and over-the-counter capital accounts of dealers and cut off the payment link for transaction funds in a timely manner, it said.

This crackdown has forced several miners to shut down or sell their machines in despair and exit the business. Some of them are also relocating overseas to countries like Kazakhstan, according to a Reuters report. It said that Chinas crackdown could cause up to 90% of crypto mining to go offline in the country, citing an estimate by Adam James, a senior editor at OKEx Insights.

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Chinas role in the 2021 cryptocurrency crash - Economic Times