No kidding! China’s recent crackdown on Bitcoin mining turns out to be a good thing for the cryptocurrency market! This crackdown has caused Bitcoin’s hash rate to fall by more than 30% over the past months and Bitcoin price to drop to $30,000. So how could it be? Let’s find out the answer with Tokenize Xchange.
China’s crackdown on Bitcoin mining and Bitcoin price dumping
26 Bitcoin mining companies in Sichuan Province – the largest cryptocurrency mining bases were asked to shut down as of Sunday, Jun20th, 2021. The Sichuan provincial energy bureau was required to suspend all cryptocurrency mining projects “without any tolerance”. So, after weeks of passing the cryptocurrency mining crackdown, China has finally leveled up its control over its restriction to tighten activities regarding cryptocurrency.
Along with Sichuan, Chinese authorities have put similar Bitcoin mining bans into effect in Inner Mongolia, Xinjiang, and Qinghai Province. According to Cambridge Bitcoin Power Consumption Index, China mining pools account for more than 50% of the global Bitcoin hash rate. As such, the crackdown has caused Bitcoin’s hash rate to drop by more than 30% over the past months to 90.17 million TH/s, the lowest level in 2021. This downward trend may keep going till the end of this month, meanwhile, Bitcoin price kept dropping to $30,000 and wiped out all of its gain for the year.
It has been a month since the May 19th correction, after falling from $43,750 to $30,000, Bitcoin has not been able to regain its momentum yet. Compared to the peak of $64,000 on April 14th, the price of BTC is down by nearly 50%.
The move of Bitcoin mining pools
Facing China’s crackdown on Bitcoin mining, many Bitcoin mining companies have migrated to mining-friendly areas. Jiang Zhuoer, the operator of Lebit Mining recently announced his plan to move to North America. Texas and North America are being considered as the ideal destinations for Chinese miners.
“Mining in China may change from large to family miners, even if it causes 50% of the mining machines to fail to operate, there is no problem for the Bitcoin system. But the top mining pools may become European and American mining pools.” Said Zhuoer.
Recently in an interview with CNBC, Miami Mayor Francis Suarez said that the city was offering attractive incentives for crypto miners to locate their headquarters. He also emphasized that the city’s nuclear power is a clean and inexpensive source of energy. Other states like Wyoming are also implementing various legal aid programs for crypto miners who desire to operate.
Why China’s crackdown on Bitcoin mining can do good for the market
As mentioned above, China mining pools account for more than 50% of the global Bitcoin hash rate. Bitcoin has been seen as a decentralized market, however, the idea that most of the mining pools are located in the same region (mainland China) is not necessarily a good thing for Bitcoin in the long term.
So it could be good for Bitcoin mining activities to be taken away from coal-powered energy-based regions like Inner Mongolia to move to a region with sustainable energy.
According to Blockchain.com co-founder and CEO Peter Smith, it would be a hard time for Chinese mining firms in the short term to sell down a lot of their inventory to move overseas. But in a couple of years, it would be hugely positive for Bitcoin decentralization and the diversification of Bitcoin mining operations around the world.
Opportunities for bitcoin miners
According to Joaquim Matinero Tor, Banking, Finance & Associate at Roca Junyent, the recent crackdown from China looks like a strategic move to boost Chinese cryptocurrency – the Digital Yuan. “China has banned Bitcoin 13 times since 2012 so there’s no news there. China wants to move forward with Digital Yuan, its CBDC, so they want a BTC not so strong as it has been during the last few months,” said Joaquim.
Said Marc P. Bernegger, a board member of Crypto Finance AG, “I personally see a lot of long-term advantages if crypto miners are moving out of China into more crypto-friendly jurisdictions.” He emphasized that this crackdown would challenge the argument of Bitcoin mining energy and could turn more existing mining pools into green energy-based mining facilities.
Moreover, numerous bad news regarding cryptocurrency was exaggerated in China with consecutive crypto restrictions issued. And recent announcements from the Chinese government will further push Chinese miners to other crypto-friendly countries.
Bernegger added: “Being invested in Bitcoin since 2012 myself makes me feel quite confident that after the actual price correction we will see new all-time highs going forward,”
China’s crackdown on Bitcoin mining seems to be bad news for the market, however, in a world full of volatility, a risk can turn into an opportunity and vice versa. Following Tokenize Blog for more cryptocurrency analysis!