The price of Bitcoin and Ether recently tumbled as much as 5% after the People's Bank of China declared that all crypto-related activities are prohibited. This includes all services that offer trading, derivatives, or order matching for virtual currencies.
The Chinese government has also restricted digital currency mining, the process in which cryptocurrencies, such as Bitcoin, are produced. The process of digital mining has been criticized in recent months for the amount of energy that it consumes and the pollution that it produces.
Constantine Tsavliris, head of CryptoCompare told CNBC the drop in value is likely to be short term.
“The recent news by China serves as an extension of previous announcements in May regarding a crackdown on cryptocurrency mining and bans on financial and payment institutions from crypto-related services," Tsavliris said. “As a result of the bans, we previously saw a short-term sell-off and a shift in mining away from China, followed by a swift recovery throughout July and August".