A market rout that hammered the value of some of the world’s top cryptocurrencies and non-fungible tokens (NFTs) has piqued the curiosity of Chinese internet users, even though cryptocurrency trading is illegal in the country.
Luna, a cryptocurrency that saw its prices plunge over 80 per cent on Tuesday, was at one point the top trending search term on Chinese social media platform Weibo on Wednesday, after it showed up on the trending search rankings earlier.
Bitcoin, which was down to half of its value this week from its peak in November, was also one of the most searched terms on Weibo on Tuesday.
Strong interest in those topics suggests that a sizeable, albeit silent, community of cryptocurrency enthusiasts exists in China, despite Beijing’s forceful crackdown. China once accounted for the great majority of the world’s bitcoin trading and mining volume, before the government outlawed the activities to prevent potential capital flight.
The prices of a range of popular cryptocurrencies have slipped as investors sold off riskier asset classes that also included technology stocks, following moves by the Federal Reserve to raise interest rates to tame decades-high inflation.
Troubles surrounding TerraUSD, an algorithmic stablecoin designed to be pegged to the US dollar through its operation in conjunction with Luna, have also eroded investors’ confidence. It started trading well below US$1 this week, falling 83 per cent to below 50 US cents on Wednesday.
The world’s most popular non-fungible token (NFT) collections, including Bored Ape Yacht Club (BAYC), have lost their shine amid the market slump. The average sales price of BAYC, which was already fending off criticism from buyers after a chaotic launch of new virtual land NFTs, fell 29 per cent over the last seven days in US dollar terms, while transactions and user numbers tanked by 21 per cent and 27 per cent respectively, according to data from Price Floor and DappRadar.
Cryptopunks and Moonbirds, two other popular NFT projects, also saw their floor prices – the lowest price found in a collection of NFTs – drop more than 20 per cent.
On Weibo, a page hosting posts with the hashtag “Luna” drew nearly 8 million views on Wednesday, as users commented that they were “witnessing history”.
Despite Beijing’s ban on cryptocurrency trading, enthusiasts in the country are known to have found workarounds to skirt the restrictions.
On OKX, one of the world’s biggest cryptocurrency exchanges by trading volume, 9.61 per cent of its desktop web traffic came from China on Wednesday, according to data from SimilarWeb, as first reported by cryptocurrency news outlet Wu Blockchain.
China was the second largest contributor of desktop traffic to the exchange, trailing Russia with 12.18 per cent.
On Huobi, another popular cryptocurrency exchange, China contributes roughly 5 per cent of the desktop traffic, SimilarWeb data shows.
Chinese internet users have also been buying NFTs, which are not illegal in the country, although so-called digital collectables on domestic blockchains are sold in yuan and mostly prohibited from resale.
While a slew of state-run entities and major technology companies have dabbled in NFTs, Chinese authorities have repeatedly issued warnings against the financialisation of the virtual assets, while warning about the associated speculative risks.