First Mover Asia: Bitcoin Rebounds Past $20K; China’s Blockchain Revolution Is Missing On-Chain Data

Ether and most other major altcoins regain ground they'd lost in last week's downturn; China companies seem unconvinced by blockchain technology.

AccessTimeIconJul 5, 2022 at 12:20 a.m. UTC
Updated May 11, 2023 at 4:44 p.m. UTC

Good morning. Here’s what’s happening:

Prices: Bitcoin gains ground, hovering just above $20K.

Insights: China's blockchain revolution may not be so revolutionary.

Catch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis. And sign up for First Mover, our daily newsletter putting the latest moves in crypto markets in context.


Bitcoin (BTC): $20,244 +5%

Ether (ETH): $1,152 +7.3%

Biggest Gainers

Asset Ticker Returns DACS Sector
Avalanche AVAX +3.7% Smart Contract Platform
Decentraland MANA +3.5% Entertainment
Solana SOL +1.3% Smart Contract Platform

Biggest Losers

Asset Ticker Returns DACS Sector
Terra LUNA −3.3% Smart Contract Platform
Stellar XLM −0.9% Smart Contract Platform
XRP XRP −0.3% Currency

Bitcoin Gains Ground but Lingers Under $20K

On a day of fireworks and bombast in the U.S., crypto had a little to celebrate as well.

Bitcoin crept back over the $20,000 threshold that has been a psychological observation point since the start of the summer for investors gauging the length of the current bear market. The largest cryptocurrency by market capitalization was recently trading at about $20,300, up 5% over the past 24 hours. Bitcoin plummeted below $19,000 at one point last week before regaining ground during a Friday rally.

Ether rose even more in Monday trading along with several other major altcoins as investors seemed more receptive to risk. The second-largest cryptocurrency by market cap was changing hands at more than $1,150, a nearly 8% gain over the previous day. Among other major cryptos, SOL and SAND jumped more than 9% and 8%, respectively.

Still, the crypto Fear & Greed Index remained wedged in extreme fear territory as the industry absorbed its latest body blows, and analysts remained downcast about prices for at least the near-term, short of convincing evidence that inflation is under control and the global economy will not fall into recession. Bitcoin and ether are off more than 5% and 6% from their highs early last week, and most other cryptos are also well in the red over the same period.

"Bitcoin has been under even pressure for almost all last week," FxPro Senior Market Analyst Alex Kuptsikevich wrote in an email. "A brief bounce at the beginning of the day on July 1 was more likely due to emotional excitement from the start of a new period (month, quarter, half-year) rather than fundamental changes in the situation."

Ether price weakness

ETH’s price weakness continues as The Merge, which will see the network change from a proof-of-work to proof-of-stake protocol, fast approaches. Trading was light as the U.S. celebrated its Independence Day. U.S. equity markets were closed in observance of the holiday, but European indexes were up with the Stoxx Europe 600 rising 0.5% on Monday.

To be sure, Binance CEO Changpeng Zhao recently called the crypto winter a good time to buy bitcoin for investors who can wait for the next bull market. And a survey from Mastercard (MA) reported that over 51% of Latin Americans made at least one transaction with cryptocurrencies between March and April of this year.

But industry-wide cascade of bad news continued with crypto hedge fund Three Arrows Capital filing for bankruptcy late Friday after weeks of speculation that it was functionally insolvent; American-Israeli crypto lender, Celsuis, laying off some 150 employees over the weekend as it battles a financial crisis that saw it halt customer withdrawals last month; crypto lending platform CoinLoan limiting the size of withdrawals; and another crypto lender, Singapore-based Vauld, suspending all withdrawals, trading and deposits on its platform as it looks at restructuring options.

Troubled economic backdrop

Kuptsikevich noted the troubled economic backdrop that is likely to continue bedeviling crypto markets.

"The global picture remains bearish as stock markets show no glimpses of tightening financial conditions by central banks," Kuptsikevich wrote. "On the weekly charts, BTCUSD remains below the 200-week average, having failed a timid attempt to climb higher last week."


S&P 500: 3,825 +1%

DJIA: 31,097 +1%

Nasdaq: 11,127 +0.9%

Gold: $1,808 +.02%


China's Blockchain Revolution May Be Falling Short

Blockchain technology is a national priority for Beijing, having been name-checked in 2019 by People’s Republic of China President Xi Jinping as an important opportunity that needs to be seized, and mentioned as a key technological pillar of China’s five-year policy plan in 2021.

“We must take the blockchain as an important breakthrough for independent innovation of core technologies,” Xi has been quoted as saying, outlining the government’s policy to integrate the technology into the IT fabric of the bureaucracy at large.

And with this came the Blockchain Service Network (BSN), a state-backed infrastructure program that would allow enterprise developers to assemble and develop code to build blockchain-based applications with relative ease.

Of course, this isn’t real blockchain per se. It’s a neutered version of that called "permissioned blockchain." No corporation or government, in China or elsewhere, wants their key data to be in a decentralized state they can’t control.

As the South China Morning Post reported last week, China is home to nearly 1,800 blockchain services companies that purport to be integrated into most parts of the economy and bureaucracy.

Companies are unconvinced

There’s a problem, though: Outside of China, companies have realized that enterprise blockchain is pretty useless. As CoinDesk reported in early 2021, IBM (IBM), which is effectively synonymous with enterprise computing, has dismantled its blockchain team. Shortly after, Microsoft (MSFT) discontinued its Blockchain service on Azure cloud. The U.S. Food and Drug Administration, which once touted blockchain as part of a "smarter era of food safety," has abandoned the initiative.

Technology market research firm Gartner noted in its hype cycle forecast for 2021 that “successful permissioned enterprise blockchain projects are scarce.”

While things like decentralized finance, payments, and tokenization all have some appeal, Gartner said, enterprise blockchain is stuck because “most users are stuck trying to align use cases to the technology.”

“The value of permissioned blockchain is hard to understand since it does not implement the most revolutionary aspect of public blockchains – i.e., trust minimization and elimination of central authority, achieved via decentralized consensus,” Gartner wrote in another post on the topic.


In China’s case, companies are doubling down on blockchain because of the many incentives available, such as a $140 million subsidy fund in Guangzhou – the actual utility of the technology be damned. If the government thinks the technology will help its economic ambitions and wants to throw money at it, companies will happily oblige and play along.

This is especially true if they can leverage this with investors to juice a funding round. At one time, China was home to nearly 35,000 blockchain companies, according to publicly available corporate registration data. Of course many were firms jumping in by adding blockchain to their name to access development subsidies, as well as out-and-out frauds. That number, according to SCMP’s report, is down to around 1,800, so the herd has been thinned.

Still, it's questionable what exactly these 1,800 companies are doing. On-chain data is key to verifying any claims involving blockchain. But with these permissioned chains, it's impossible to use a block explorer to inspect the data and verify claims of data volume, something that’s a central tenant for the “trust machine” that is blockchain.

Important events

8:30 a.m. HKT/SGT(12:30 a.m. UTC): Jibun Bank Services PMI (June)

9:45 a.m. HKT/SGT(UTC): Caixin (China) Services PMI (June)

CoinDesk TV

In case you missed it, here is the most recent episode of "All About Bitcoin" on CoinDesk TV:

In one of the biggest scams in crypto history, the Commodity Futures Trading Commission (CFTC) is charging South African bitcoin club Mirror Trading International with $1.7 billion fraud. CoinDesk's Managing Editor for News Danny Nelson shared insights into this story. Plus, Caitlin Long of Custodia Bank discussed crypto regulations and Nick Mancini of Trade The Chain provided market analysis.


Three Arrows Paper Trail Leads to Trading Desk Obscured Via Offshore Entities: As Three Arrows Capital collapsed under market pressure, its much-lesser known trading desk, TPS Capital, remained active, sources say. But a complex ownership structure might frustrate creditors' efforts to collect.

Crypto Lender Celsius Cuts 150 Jobs Amid Restructuring: Report: Withdrawals are still paused and the company has hired restructuring experts as it faces a financial crisis.

Bitcoin Recovers to Over $19K; Nomura Warns of US, UK Recession: Nomura warned of a recession in the eurozone, U.K. and Asia Pacific, which could influence crypto prices.

Longer reads

LTCM and Other History Lessons for Crypto: From Long-Term Capital Management to the 2008 financial crisis, crypto's recent woes have echoes in the past, says CoinDesk's chief content officer.

Said and heard

"The Vauld management wishes to inform that we are facing financial challenges despite our best efforts. This is due to a combination of circumstances such as the volatile market conditions, the financial difficulties of our key business partners inevitably affecting us, and the current market climate..." (Vauld trading platform/blog) ... "We are introducing a temporary measure – a reduction of the account withdrawal limit – in order to balance the flows of funds and prevent liquidity-related interruptions. Please note that this is only a precaution, as the current level of liquidity meets our users’ needs. This temporary restriction applies to the total amount of daily withdrawals per account: every user can withdraw up to $5,000 per 24-hour rolling period." (CoinLoan crypto lending platform/blog)


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James Rubin

James Rubin was CoinDesk's U.S. news editor based on the West Coast.

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