Cryptocurrency markets were severely shaken recently as the price of Bitcoin and other digital currencies plummeted over fears of a crackdown on cryptocurrency mining by the Chinese government. As the world’s largest Bitcoin mining hub, China’s policies regarding cryptocurrency are bound to have a significant impact on global markets. Whether or not you are personally invested in cryptocurrencies, history has shown that fluctuations in digital currency markets can create ripples that cause the rest of the stock market to drop as a result. If China bans cryptocurrencies, what effect could that have on your retirement plans? The retirement phase experts at Crash Proof Retirement® are monitoring the situation closely; here is our take on China’s cryptocurrency crackdown.
Will China Ban Cryptocurrencies?
Over the past few years, China has risen to the top of the cryptocurrency mining industry, with some studies estimating that the country is responsible for up to 75% of global Bitcoin mining. In May 2021, China’s Vice Premier Liu He announced a crackdown on Bitcoin mining and trading activities to promote economic stability. Other Chinese government officials have expressed concern over the carbon emissions associated with mining, leading the Inner Mongolia, Xinjiang, and Sichuan provinces to shut down mining operations or institute bans on the mining and trading of cryptocurrencies. Electric companies were even instructed to cut power to mining operations that were discovered in some of these areas in China. Governments of other Chinese provinces are reportedly preparing to take similar actions.
If you think these regional crackdowns will not have a larger impact, consider this: when a coal-fired power plant in Xinjiang was forced to shut down after being flooded in April 2021, it wiped out more than one-third of Bitcoin’s global computing power. While this event alone did not set off a corresponding drop in stock market performance, it does show just how much influence China has on global cryptocurrency markets.
When the news of China’s cryptocurrency crackdown spread, over $400 billion was wiped out from cryptocurrency markets, erasing all of Bitcoin’s gains for 2021, before moderately recovering. China is not the only country taking similar steps to keep a closer eye on bitcoin; in fact, the U.S. Securities and Exchange Commission (SEC) has consistently rejected several applications for the creation of Bitcoin Exchange-Traded Funds (ETFs), which would go a long way towards legitimizing cryptocurrency as a mainstream investment product. With China showing reluctance to support cryptocurrencies, it seems unlikely that the SEC and other regulators will change course and give digital currencies their endorsement soon. It is possible that U.S. financial regulators will institute similar crackdowns that could put a serious strain on cryptocurrency’s value as an investment, even as miners look towards areas in the U.S. for their next destination to set up operations.
How Do Cryptocurrencies Affect Your Retirement Plans?
You may think that you can protect yourself from the volatility of cryptocurrency markets by investing your money elsewhere. That is true to an extent, but the fact that hedge funds, mutual funds, and even pension funds have added cryptocurrencies to their holdings should be cause for concern for anyone invested in the securities market. Some investors are not aware that their funds are invested in cryptocurrency. If cryptocurrencies were to be banned around the world, it would most certainly cause short-term drops in securities markets that could translate to long-term crashes. The only way to protect your retirement plans from the volatility caused by cryptocurrency is to remove your money from the securities market entirely.
Luckily for those who are in or near retirement, there is an alternative to risky securities-based investments. Since its creation, the Crash Proof Retirement® System has protected more than 5,000 retirees from stock market crashes with proprietary financial vehicles that credit interest and guarantee principal protection in the event of a market downturn. If you would like to know more about the investments that make up the Exclusive Crash Proof Retirement® System, our licensed educators are here for you. Call us at 1-800-722-9728 or visit crashproofretirement.com to schedule your complimentary financial checkup today.