China is coming down hard on crypto, again.
More news of China’s war on Bitcoin (BTC) has caused another massive decline in the world’s biggest cryptocurrency, and the market as a whole. In the space of a month, Beijing has sent Bitcoin on a precipitous tumble from its all-time high of around $65,000 to the level at which it’s currently stuck in a rut, just below the $33,000 mark.
Investors are, finally, beginning to wonder why one country should have so much influence over the price of Bitcoin – and the optimists are now saying, “good riddance!”.
In recent years, China has become the hub for crypto mining opportunists. For any currency, supply plays a key role in determining its price, and within the crypto ecosystem, China effectively controls the supply of crypto through its major mining operations, which are unmatched in scale throughout the world.
Approximately 65% of all mining operations are based in China. Bitmain is a Chinese company that runs 30% of all mining operations and operates the world’s two largest mining pools.
But those figures are now consigned to the dustbin of history as the Chinese government launches its next battle against the decentralised currency.
Crypto’s Recent China Woes
In reality, the FUD (Fear, Uncertainty and Doubt) surrounding Bitcoin has been around for most of its existence, and nowhere more so than Beijing. But in terms of policy, China’s crypto onslaught only started in May 2021, when governmental bodies, namely The National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China declared that finance and payment entities must no longer conduct crypto-related business. This act of hostility sent Bitcoin swan-diving from an all-time high to as low as $30,000 on May 20th, 2021.
Then, on June 5th, more than 20 crypto influencers suddenly found their Weibo accounts suspended in what was a concerted censorship effort. Influencers were greeted with a message informing them that they had violated Weibo guidelines on “adhering to relevant laws and regulations”.
Most recently, China’s three largest provinces ordered Bitcoin mining operations to close down. In Sichuan alone, 26 mines were ordered shut, according to a decree widely shared on Chinese social media sites and confirmed by miners in the region.
These provinces are mountainous regions in the southwest of China, and home to the world’s largest crypto mines – which are basically massive centres with tons upon tons of computer processors, owing largely to the number of hydroelectric plans in the region.
The recent attacks have caused Bitcoin’s hashrate, which is the overall computational power devoted to solving Bitcoin’s complex puzzles, to halve since its peak.
Finally, the Agricultural Bank of China, which is also effectively the world’s third-largest bank, is set to begin rigorously vetting its clients to ensure they are not involved in crypto transacting or mining.
So How Is This Good For Bitcoin?
So is China’s hardline stance on Bitcoin, its closure of around two-thirds of Bitcoin mines in the world, actually good for Bitcoin? Yes, and here a few of the reasons why:
Now that crypto mining is illegal in China, miners will move their operations to other regions of the world. Photos of the airlifting of 3,000kg of mining equipment out of the country have already surfaced online.
Countries with favourable environments for Bitcoin mining, such as El Salvador and the US, will benefit greatly, as will crypto itself, from the easing of power concentration.
Chinese regulations will have far less impact on Bitcoin value
Currently, the influence of the Chinese government over the price of Bitcoin is astronomically high, and has affected the markets greatly in recent times. Now that the bulk of mining is being exiled, Chinese government actions will have far less sway over the value of crypto and will eventually have little to no impact on price.
Bitcoin will become a more green, sustainable digital currency
In more recent years, large mines have been built in Europe, the US, and other regions outside of China, but that trend will now accelerate at breakneck speed. This helps to address some of the sustainability concerns around Bitcoin mining and the coal-powered energy sources out of China.
Headlines about Bitcoin mining being energy-intensive have also caused the price to decline heavily, most notably when Elon Musk cancelled BTC payments for Tesla, citing the environmental impact of the currency. Countries like the US and El Salvador have been making huge strides to ensure that mining is done using clean and renewable energy, which should help sustain a healthy price for BTC.
In El Salvador, plans are being made for volcano-based crypto mining, which uses 100% neutral energy with no carbon emissions whatsoever.
Meanwhile, in the US, interested parties have founded the Bitcoin Mining Council of America to promote the use of sustainable energy in Bitcoin mining, as a response to Musk and Tesla’s recent criticisms.
China being the single most influential factor in the price of Bitcoin is quickly becoming a thing of the past. Until today, China has had several mechanisms through which to influence the crypto market price. These levers are now being dismantled through their own actions, meaning Bitcoin and the crypto market are heading into a more decentralised future – one that fragments the crypto powerbases, and advocates for the use of sustainable energy in Bitcoin mining, thereby heralding a new green environment.
In the short run, China may well continue to impose bearish sentiment on crypto. In the long term, as policies out of China have less and less impact on the future of the crypto market, the ecosystem will stabilise and will help Bitcoin and other cryptocurrencies take on new highs.
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