An active campaign by the Chinese government against the crypto industry, launched a few weeks ago, has forced many miners to stop their business and even leave the country.
All this negatively affected the price of Bitcoin, hash networks – that is, the total amount of computing power of devices for mining cryptocurrency – and the morale of many investors.
While the market is recovering from the shock, it’s time to reflect on the question: will the consequences of all this happen positive for digital assets, or are they doomed to a new large-scale bearish trend?
Bitcoin looks good this morning. Over the weekend, the cryptocurrency sank noticeably down to $ 30,151, but has since fully recovered. Today BTC is valued at $ 34,548, which means that the recent drop is almost imperceptible.
Other coins look pretty good too. For example, Ethereum is priced at $ 1,986, which is significantly higher than Saturday’s bottom at $ 1,717.
Strength is shown by Solana SOL, which managed to recover to levels before the fall.
Cryptocurrency problem in China
The Chinese government has never favored the cryptosphere. Throughout most of its existence, the PRC has always opposed the development of the industry, from which even the so-called “China FUD” meme was born , denoting every stream of negative news from the Middle Kingdom.
As a reminder, back in December 2013, the People’s Bank of China introduced a ban on the processing of transactions in BTC by commercial banks. But even such a news background did not prevent Bitcoin miners from making China the first country in terms of network computing power. This means that the miners were not stopped by the restrictions imposed by the local government. In addition, BTC has since updated its historical highs several times, which also speaks of the ability of the cryptocurrency to grow in any conditions.
It is important to note that China has regularly “bans” Bitcoin and mining, and has also “shut down” local cryptocurrency exchanges for years. Here are the headlines from archival articles that support this – some of which were even published in 2013-2014. Despite the government’s activity, cryptocurrencies continue not only to exist, but also to actively develop.
Now a turning point has come in history – this time open pressure from the government was so strong that now China may completely lose its status as a place where the largest share of the network hashrate is concentrated. Analysts interpret what is happening in their own way: some talk about the “death of Bitcoin”, others consider the actions of financial regulators to be the final push to launch the national digital yuan project.
But there is reason for optimism here, according to CryptoSlate. If miners are fleeing China en masse, there is a possibility that in the future most of the hashrate will be provided by green electricity. At one time, China became an attractive place for miners precisely because of the “cheap socket”, which was provided by cheap, but harmful to the environment electricity.
True, it all depends on the region of the world where miners will settle in the future. Their next major center may be Kazakhstan, but only 70 percent of the country’s electricity is produced at coal-fired power plants. A mining boom is expected in Russia and the United States, where mining farms are being transported right now. Ultimately, experts agree that the redistribution of the hash rate around the world will make the Bitcoin network more decentralized, which will increase the guarantee of cryptocurrency protection from encroachments from any one government.
However, the chances of a successful attack on a large cryptocurrency network are negligible. First of all, the cost of this activity is very high. In addition to this, representatives of the defending party can fork the network – that is, a fork of the blockchain – and get rid of the author of the attack. For example, in the updated Eth2 network, rule violators are fined automatically and quickly, so this attack vector will make even less sense.
We checked the actual data: the cost of an hour of attack on the Bitcoin and Ethereum networks is 0.6 and 1.2 million dollars, respectively. And it is too expensive as an attempt to create problems for blockchains.
Business for large mining centers – especially after Bitcoin’s explosive growth earlier this year – still remains a very lucrative business for those with a large number of crypto farms. It is unlikely that companies from this area will leave the market so easily, so when the relocation is completed, we can safely expect a reaction from the BTC price. Still, it is usually associated with an increase in the hash rate, and this is already a guaranteed event that happened before and will most likely happen after the miners move.
We believe that in the short term, the activity of the Chinese government has already affected negatively what is happening in the world of cryptocurrencies. However, in the future, the move of miners to other countries and a decrease in the share of the total network hash rate in one state will benefit the coin industry itself and the reputation of the digital blockchain asset niche in general. Therefore, it is likely that the country’s leadership has done cryptocurrency investors a favor.