A few weeks ago, the Chinese government launched a coordinated operation involving multiple agencies, including the central bank, to discourage individuals from transacting in cryptocurrencies. This was a good litmus test for the long-term viability of cryptocurrency as an asset class. With bitcoin having risen by $14,000 since then, it has passed the test with flying colours.

After passing this test, there are two more questions. One question is whether inflation fears are a boon for cryptocurrency. Since inflation expectations began to rise two weeks ago, crypto assets have performed exceptionally well. Could they become popular as an inflation hedge, as gold has in the past?

China declares all crypto-related transactions illegal and forbids overseas exchanges from serving its citizens | Currency News | Financial and Business News | Markets Insider

The second concern is the regulatory approach to cryptocurrency and its impact on the asset class. Clearly, the Chinese prohibition on crypto transactions has had no effect on people's trust in bitcoin as a store of wealth or their interest in the area in general. One could argue that it has had the opposite impact. Other nations considering how to regulate crypto assets would be well to take this experience into account.