Beijing Forces Bitcoin Miners To Halt Businesses in Major Crackdown
Chinese Bitcoin miners are struggling to mint currencies s they have been forced to shut down operations after the latest round of ‘crypto FUD’ initiated by the government, a report by news outlet Reuters said today.
Bad News: Beijing Goes In Hard
Cryptocurrency exchange, Huobi, this morning took the lead when it suspended all mining operations, along with the cessation of trading services for Chinese users.
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“Huobi suspends providing mining machine sales and custody services to domestic users. ” pic.twitter.com/OHzipfrFdN
— 🍣🤖Joey Wong王祖兒 🥞 🎲🀄 (@JoeyWong_t3ch) May 23, 2021
In addition, BTC.TOP, a cryptocurrency mining group, also announced the suspension of its business in China citing regulatory risks, while crypto miner, HashCow, said they will no longer buy Bitcoin mining rigs anymore and will be suspending new businesses in China.
Mining, for the uninitiated, uses a massive computer system that solves millions of complex calculations every second to validate transactions on the Bitcoin network, a process known as ‘proof of work’. This requires enormous amounts of energy for the maintenance, cooling and proper functioning of the machines.
But some environmentalists say that since the source of this is through power generators powered by coal and fossil fuels, it leaves a large carbon footprint for seemingly little benefit to the world and that, in turn, works against what China is trying to achieve as a country.
“Cryptocurrency mining consumes a lot of energy, which goes against China’s carbon neutrality goals,” explained Chen Jiahe, chief investment officer at Novem Arcae Technologies,a Beijing-based family office, adding that the recent crackdown is part of the country’s campaign to end speculative cryptocurrency trading.
The annual energy consumption of China’s cryptocurrency miners is expected to peak in 2024, at about 297 terawatt-hours, according to the report.
However, this is disquietingly greater than all of Nigeria’s current energy consumption, making such amount of use a major concern among environmentalists and industrialists alike.
Bitcoin, Mining and China
Research suggests that more than 75% of Bitcoin’s hashrate, a measure of the computational power per second used during mining, originates from Chinese entities such as F2Pool, Huobi, and others. They have existed there for most of the last decade promulgated by China’s favorable weather conditions, cheaper electricity and labour rates. The technical prowess of the nation is also advantageous for mining entities to grow and prosper; however, Chinese officials are less supportive of the rapid growth.
Speaking last week, Vice Premier, Liu He, and the State Council said they would soon crack down on cryptocurrency trading and mining in the country.
”[We will] crack down on mining and mining behavior and Bitcoin trading, so as to resolutely prevent the transmission of individual risks to the social field,” said the officials last Thursday, with a drastic liquidation of the market consequently following in the subsequent hours. It is however unlikely that mining or trading will end all together as operators can simply switch to friendlier locations or use alternative energy sources.
But for Chinese miners, it’s another loss for the country:
“Eventually, China will lose crypto computing power in foreign markets as well,” BTC.TOP founder Jiang said in a statement last week, referring to how China lost its position as a cryptocurrency trading powerhouse in 2017.
Good News: Trading Volume at All-Time High
Once a trillion dollar asset, Bitcoin has now lost nearly $500 million of market capitalization since the recent crash. Additionally, market dominance is also shrinking day by day, standing at 44.7% at press time, paving the way for the other altcoins to grow. Currently, the price of BTC, which had regained the lost position above $40K, has slid down once again.
This will and should be a cause for concern despite encouraging words from experts, as if the daily close is below $40K then the probability of revisiting lower levels increases.
Hope for the CryptoVerse?
There’s however hope, as during the recent crisis, trading volume and social volume has skyrocketed like never before. This can be considered as a bullish indicators, as the market sentiments appear to be positive, thus, the price of BTC can rise, recovering losses albeit slowly but steadily.
Should I Sell Or Buy?
As the market offers an immense opportunity to accumulate in the dip, panic sellers might also sell out at a certain point.
As sell-side momentum accelerates, the chances of seller exhaustion increase
— Rekt Capital (@rektcapital) May 22, 2021
Thus, by flipping the bears, the bulls can regain the power to push up the price of bitcoin. Furthermore, the fundamentals are the same before and after the abrupt free fall and therefore a proper reciprocity with the price of BTC is imminent.
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