China & Bitcoin Mining, WTF has happened?
Exploring the repercussions of China's mining ban.
The amount of computing power on the Bitcoin network dropped ~50% in the past month because China banned Bitcoin mining. Here's what you should know:
China is banning Bitcoin
China has a history of banning tech. Remember, Google, Youtube, and Facebook aren't legal in China either, and their growth has been pretty good.
China has cracked down on Bitcoin since 2013, first banning it as a transaction medium, then cracking down on trading, and now banning mining. Shutting down mining is definitely the biggest action the country has ever taken against the country's Bitcoin economy. Michael Saylor is calling it "China's $1 Trillion mistake".
The mining ban began on May 19th and progressed through June 18th. The Chinese government ordered financial intermediaries and utility companies working with mining companies to stop doing business with them. There was much speculation about whether China was serious, as they've been known to create FUD (Fear, Uncertainty, Doubt) regarding crypto in the past, but the data clearly shows that they have in fact shut down the majority of mining operations in the country.
The chart above shows Bitcoin is currently at a one-year low for network computing power; 50% of network power has been lost in the past month based on this China ban, indicating that 40-50% of all mining was concentrated in China, which has long been speculated.
Bitcoin mining operations have significantly decreased due to the China ban, but is it a good thing for Bitcoin and crypto everywhere else?
Why this could be good for Bitcoin
There is one certainty in the short term. This is going to make Bitcoin mining more profitable for existing non-Chinese miners. The Bitcoin mining reward is staying the same, but the competition has gone down by 50%. This would be a great time to be a Bitcoin miner.
What this means regarding Bitcoin price is harder to predict. It just became easier to get bitcoin through mining, so in the short term, this could cause more selling pressure. In the long term, this could provide two potential benefits:
Bitcoin mining becomes more decentralized.
Bitcoin mining investment accelerates in the United States.
One of Bitcoin's biggest criticisms has always been that it was too centralized in China. A Chinese-controlled "decentralized" currency would be an oxymoron and a serious cause for concern. Even if China reverses its stance, the damage is done. Chinese miners are now forced to close up shop and sell what they have or look for foreign soil to plug their chips back in. Countless reports have come out about Chinese mining operations seeking to export their operations, often to Bitcoin-friendly locations in the Americas. Overall, some short-term FUD could lead to a more robust global Bitcoin economy.
Some key stats:
The China mining ban is the biggest mining network shakeup in Bitcoin history.
Bitcoin lost 50% of network power in the span of a month and a half.
At current prices, Bitcoin mining has become more profitable, especially so at peak prices.
The Bitcoin Fear and Greed Index has switched from Extreme Fear to Fear in the last few days as hopes rise for mining investment in the United States.
Resources:
World's first bitcoin ETF has seen $3M per day added during the most recent price dip.
How China's bans are changing the Bitcoin landscape.
U.S. Bitcoin Miner Blockware raises $25M and builds a facility in Kentucky.
U.S.-based bitcoin mining firm TeraWulf buys $100 million worth of mining machines.
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