What happened 

Cryptocurrencies and crypto stocks took another downturn on Wednesday after China issued a number of restrictions on the use of digital currencies. Not only does that potentially reduce the market for cryptocurrencies and undermine the thesis that they're global assets, but most Bitcoin (BTC 0.47%) mining also takes place in China, which complicates the industry's future. 

Crypto stocks overall are down big today, but some of the more notable movers were Canaan (CAN 7.41%) dropping as much as 14.7%, Riot Blockchain (RIOT 4.17%) falling 15.5%, Marathon Digital Holdings (MARA 7.25%) losing 16%, Bit Digital (BTBT 1.10%) off 17.1%, and MicroStrategy (MSTR 6.00%) losing 15.5% of its value. The stocks recovered some of those losses by noon EDT, but were still down big for the day. 

The notable crypto moves were Bitcoin falling 13.2% as I'm writing this, Ethereum (ETH 1.66%) dropping 18.5%, and Dogecoin (DOGE 0.88%) losing 21.1% of its value. Across the board, crypto assets are down double digits, with some losing over 30% of their value at one point today, on top of losses from earlier in the week

A Bitcoin laying in the dirt.

Image source: Getty Images.

So what

The biggest news of the day is that China has banned financial institutions and payment companies from providing services for cryptocurrencies. That means consumers can't use crypto as a form of payment in China or transfer it out of the country through traditional institutions. The government also warned investors against speculating on crypto assets, which it says is "infringing on the safety of the people's property and disrupting the normal economic and financial order."

China is notoriously controlling of its financial markets, so these restrictions aren't surprising. But it's also one of the biggest potential markets for crypto and is the No. 1 location for mining Bitcoin. If restrictions make it difficult to mine crypto in China and reduce the addressable market for crypto overall, it could be a bad sign for its long-term viability. 

To make matters worse, Coinbase and Binance were among the cryptocurrency exchanges that had outages this morning. As two of the most popular exchanges for crypto, it's not reassuring if they go down as prices drop like a rock, which is another black eye for the industry's viability.

Now what

Cryptocurrencies and companies that own them or mine them are all dependent on high prices to remain viable. Digital currencies aren't commonly used for transactions and aren't backed by anything other than confidence, so when China bans transactions and former bulls like Elon Musk lose confidence, it's hard for the industry to thrive. 

It's also hard to see where the bottom could be for cryptocurrencies like Bitcoin and Ethereum, despite losing nearly half of their value from highs earlier this year. It's possible crypto bounces back if new buyers come into the market, but it's also possible that large buyers and institutions that bid it up in late 2020 and early 2021 are abandoning ship. And that uncertainty is what will keep me away from any cryptocurrency stocks today.