Why are bitcoin, ether, litecoin and other cryptos crashing?

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Cryptocurrency traders are set to have a rocky day after China’s central bank announced that all cryptocurrency-related transactions are now illegal, reports Bloomberg. The news sent the price of various cryptocurrencies crashing.

As of the time of this writing, bitcoin is down almost 3.5%, according to CoinDesk, since China’s central bank posted the announcement on its website. But it’s not just bitcoin that is falling off a cliff edge. As a matter of fact, other cryptocurrencies are being hit even harder by the news. Ethereum is down almost 7%, XRP is down over 7%, dogecoin is down over 8%, and litecoin is down almost 7.5%.

As for why China’s central bank is cracking down on crypto, the official reasoning given, according to Bloomberg, is to stamp out crypto mining, which is energy-intensive and thus will help China meet its carbon goals. However, China also happens to have its own digital currency—the digital yuan—that competes with cryptocurrencies. The digital yuan is the world’s first digital currency to be issued by a major sovereign power and some see it as a major threat to the supremacy of the U.S. dollar. Kneecapping cryptocurrencies could help China’s digital yuan rise to prominence much faster in the country of over one billion people.

While China’s latest moves are sending shockwaves through the crypto markets this morning, they aren’t totally a surprise. China began its crackdown on cryptocurrencies earlier this year.

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