Recent events have shown that the traditional financial market is just as volatile as any other market; contrary to the popularly held consensus that cryptocurrencies are the only volatile market. China’s falling stock market proves that the traditional financial market is just as volatile as the cryptocurrency market.
Over the past few days, two of the biggest stock indexes of China have become the worst-performing markets of the Asia-Pacific. The CSI 300, which tracks the largest mainland China stocks, and the Hang Seng index which tracks Hong Kong stocks have both plunged 8.3% and 7.88% so far this year respectively, according to a CNBC report.
The decline is said to be a result of China’s regulatory actions on most of its largest sectors including technology, education, and food and delivery services. Alibaba, Tencent, and Meituan, some of the biggest tech names in China, are amongst the worst hit as the government looks to curb its market dominance.
Additionally, Chinese companies’ stocks listed in the U.S. plunged as Beijing issued new regulations cracking down on education technology companies that provide services such as tutoring. One of the companies, New Oriental, saw their stock drop 60% when the market opened on July 23, when the announcement was made.
In what observers have noted as the biggest two-day fall since the 2008 financial crisis, the Nasdaq listed Golden Dragon China Index, which tracks the biggest US-listed Chinese companies, fell 15%. Since February, the index has fallen 45% wiping out around $770bn of its value as investors, local and international, are selling massively to exit the market due to the regulatory crackdown going on in the country.
Meanwhile, the often criticized cryptocurrency market has been thriving. The two biggest cryptocurrencies by market cap, Bitcoin and Ethereum have seen significant growth by several indicators.
Despite Bitcoin suffering its biggest crash this year, data indicate that most Bitcoin investors are still in profit. Bitcoin and Ethereum have also been recovering lost ground and seem to be reversing the bearish trend in the market with Bitcoin up 26.57% in the last seven days, while Ethereum is also up 21.35% in the same time frame.
It becomes ironic that the stocks in China are crashing after the country sent Bitcoin miners packing. China has lost a lot of revenue in banning Bitcoin mining and is losing more by going after its big tech companies, orchestrating their market volatility.