China Cryptocurrency Crackdown Ignites Shock And Awe With Bitcoin And Ethereum Investors
China is one of the largest cryptocurrency mining countries in the world, in part due to its sheer population, cheap electricity, and easy access to electronics. This year, Bitcoin and other large cryptocurrencies took off alongside new coins like Chia, which saw immense popularity in China. Now, the Chinese government has cracked down on cryptos overall, and miners are pulling out of the country, leading to a sharp price slump across the board. Will this trend continue, or will cryptocurrencies recover in traditional fashion?
Last Friday, Chinese Vice Premier Liu He announced a crackdown on Bitcoin mining and trading to “fend off financial risks.” This announcement came just a few days after a ban on banks and payment companies providing cryptocurrency services. This combined attack on cryptocurrency, alongside other world events such as Elon Musk stopping Bitcoin payments with his company Tesla, led Bitcoin and other cryptocurrencies to drop in value as much as 50%.
With this shift in winds from China, many cryptocurrency miners are pulling out of the country or halting operations at least until the situation can be assessed. The problem with this is that Chinese miners account for an approximated 75% of the world’s Bitcoin hash rate, which is the amount of work being done to mine Bitcoin.
While this is happening, investors are still viewing cryptocurrency as an investment that will last long-term. Co-chief investment officer Ray Dalio at Bridgewater Associates, dubbed the king of hedge funds by Fortune, recently reported that he purchased some Bitcoin and stated he would rather “have Bitcoin than the bond.” Furthermore, to put things into perspective, Bitcoin is still up over 300% in the last year, which is incredible growth. Thus, this short-term dip is likely only turbulence on the way up in the long run as more people buy and hold cryptocurrency around the world.
Once things begin to settle in China and perhaps researchers can assess the eco-friendliness of cryptocurrency, we may begin to see a renewed climb in price again. Moreover, the crypto-miners leaving China will likely relocate to countries with similar electricity prices, such as those in the middle east, which will take time but is perfectly possible. We will have to see how this all ends up, but at the end of the day, Bitcoin is still up year-over-year.