Chinese Crypto Miners Panic Sold, But Most Are Still Awaiting for Clarity from the Govt.
This changes nothing, with fundamentals remaining stronger than ever. It is rather a massive opportunity to make Bitcoin green & even more decentralized by having a new wave of mining operators outside of China using renewable energy
In the last two months, the Bitcoin hash rate has seen some sharp drops. The first one came in mid-April after miners were trapped in Xinjiang, China, during a coal mining accident.
The second one came right after making a new all-time high on May 13 at 171.4 Th/s. Over this past weekend, the hash rate recorded an uptick and is currently at 151.716 Th/s, as per Bitinfocharts.
With downward difficulty adjustment coming at the end of this week, it will further normalize things by reducing fees and easing blockchain capacity.
The latest drop in the hash rate came before the reports of China banning crypto mining started doing the rounds that sent the price of Bitcoin crashing 54% to $30,000 on Coinbase and even lower on other exchanges. ETH price ended up falling 60.6% to $1,725. ETH -3.93% Ethereum / USD ETHUSD $ 2,340.63
-$91.99-3.93% Volume 21.84 b Change -$91.99 Open $2,340.63 Circulating 116.34 m Market Cap 272.3 b 11 h 2.3 Million UK Adults Now Hold Crypto Assets, 10.5% More than Last Year: FCA Report 11 h Kyber Network To Launch On Polygon With $30 Million Liquidity Mining Program 13 h SEC Delays VanEck Bitcoin ETF Decision Again, Another 45 Day Wait Period
Bitcoin price took a beating after some miners reportedly panic sold their stash, needing fiat to cover operational costs. But not everyone has done so; most of the miners are awaiting clarity from the government, which would take some time. And this could end up putting further pressure on the market.
“Once it comes, if it translates into an aggressive crackdown (e.g., raids), this could lead to further widespread selling,” noted trader and economist Alex Kruger. “So keep an eye out for China.”
In the bigger picture this gives the US a much-needed entry point into crypto to gain a foothold in mining + being the driver.
Doubtful we see any follow through though, the stain of *unclean* coins will be hard to remove.
— Zzz (@SplitCapital) May 23, 2021
What really pushed the Chinese’ over the edge and made them panic sell their crypto assets was that it was the first time such a high-ranking member of the PRC declared a “crack down on Bitcoin mining & trading,” stated Mustafa Yilham, VP of global business development at Bixin.
Usually, that means there will be some enforcement actions in the coming weeks, he said, but right now, no one knows the level of enforcement action that will be taken, and this uncertainty is creating bearish sentiments among Chinese miners, added Yilham.
— 江卓尔 Jiang Zhuoer BTC.TOP (@JiangZhuoer) May 24, 2021
Jiang Zhuoer CEO of crypto mining pool BTC.TOP, also took to Twitter to clarify the situation in the country, where the focus of the authority is to “prevent and control financial risks” and to restrain social capital from flowing into the crypto mining sector as “it might lead to risks transferring from individuals to the whole society.”
“In conclusion, Bitcoin mining will exist as normal, except the mining in China will be shifted from industrial-size datacenters to home miners, small or medium-sized miners.”
Big Chinese miners have already accelerated their migration process to other countries, making large quantities of Bitcoin mining machines available for sales.
“Everything we believe about crypto & Bitcoin remains unchanged. All the fundamentals remain stronger than ever,” said Yilham adding:
“Under this current crisis, there will be a massive opportunity – redistribution of the entire Bitcoin mining network around the globe. We need to make sure: the majority of the mining machines are not going to a single country. This is the best time to work on further decentralization.”
The long-term thesis for crypto remains unchanged.
Inflation, decentralization, privacy, programmability, seizure-resistance and censorship-resistance…these are the secular drivers of adoption.
— balajis.com (@balajis) May 20, 2021
This is an opportunity for the bitcoin and crypto market as China banning crypto mining will not only put an end to the narrative that China controls Bitcoin but also that its mining is powered by renewable sources. Everyone is of a similar opinion with Zhuoer BTC.TOP saying,
“In the end, Chinese hashpower will flow abroad just like the Exchanges did in 2017; China will play a less significant role in the global hashpower distribution.”
The narrative around Bitcoin mining being bad for the environment, incited by Elon Musk, can be fought by using this opportunity to have a new wave of mining operators outside of China using renewable energy.