EO Kyrrex. Knowledge in traditional markets is accompanied by crypto experience.
Chinese restrictions on the operation of cryptocurrencies and mining
In 2021, China’s mining process and the price of Bitcoin were not threatened. Everything was quiet until mid-May when the Chinese authorities dealt a few blows to the crypto market.
As CEO of the Malta-based cryptocurrency exchange Kyrrex, I would like to report on the state of the Chinese mining market and the challenges mining companies will face in the near future.
The announcement by China’s Vice Prime Minister Liu He to streamline the cryptocurrency and mining markets drove Bitcoin into another slump on May 21, 2021. It started bringing many companies back to the reality where Bitcoin won’t be worth $ 200,000 by the end of next year.
In just two hours, the first digital currency crashed to $ 36,000. In addition, Chinese companies that provide data center, cloud and telecommunications services can lose their licenses if authorities learn of their involvement in cryptocurrency mining.
On May 19, the Chinese authorities imposed a complete ban on financial institutions offering services in the cryptocurrency market. With this they lost the right to issue products based on cryptocurrencies, to carry out transactions and to provide services for their management.
Four years ago, the Chinese authorities made a similar attempt to regulate the cryptocurrency market. At the time, exchanges were prohibited from operating in the country. Nonetheless, there are good reasons why Bitcoin is declining, and that includes physical mining.
These changes could be related to China’s central bank lobbying for their electronic currency, in which the electronic yuan remains part of the banking system. To get it, a citizen must have an account with one of the specified banks.
Nonetheless, the events of June far exceeded shock therapy in May. Here are some of them that I thought were the most important:
In early June, Weibo users experienced administrative restrictions on accessing multiple large cryptocurrency accounts, stating, “It’s against laws and regulations.” In addition, the accounts of opinion leaders and bloggers related to cryptocurrencies have also been restricted, gradually banning the mining and dissemination of cryptocurrencies and even news on the topic.
The Chinese government has banned the mining of digital assets in Sichuan, Yunnan, Qinghai and Xinjiang provinces. It led to an enormous drop in prices, not only for Bitcoin to 30,000 to 32,000 US dollars and many other cryptocurrencies.
The People’s Bank of China held a meeting with the five largest banks in the country and with the Alipay service about the ban on all financial transactions with cryptocurrencies.
Many companies operating in the Chinese market are rushing to sell their mining assemblies and offering a 30% discount. Others are preparing to move to other countries such as the United States, Canada, or Latin America.
- I am sure that such shock therapy had to pass. For too long, China has taken the lead in mining, leaving North America, Russia, Kazakhstan and other countries far behind. It seems that China has decided to limit its influence on the world economy. The companies that survive China’s shock therapy will never return.
How do restrictions affect the mining business?
The University of Cambridge, in its report on the state of mining in the world and China, found that Chinese mining operators account for 65.08% of the global volume of any cryptocurrency mined. The world does not stand still, however, and many important events have occurred in the past two months.
Here are some of the most important:
The market responded to events in May with two declines with a major correction that saw the whales buying 77,000 bitcoins worth more than $ 3 billion.
Bitmain has decided to suspend taking orders for new builds. However, old pre-orders are delivered unchanged. The reason was the oversaturated secondary equipment market amid the mining ban in China.
At the same time, 15 banks in India form a blockchain consortium, the Blockchain Infrastructure Co. (IBBIC) from Indian Banks. The U-turn by the Indian authorities and the central bank could mark a milestone in the Asian mining and cryptocurrency financial services market. Banks’ belief in blockchain technology will only fuel interest in crypto assets.
El Salvador has decided to make Bitcoin legal tender. The country must show the world the potential and possibilities of the first cryptocurrency as a payment method. The government expects that opening the country to Bitcoin will allow people to invest more in the country’s economy.
Another boom in the crypto mining market began in Argentina due to the affordable price of electricity, with a target for the current Bitcoin price of around $ 30 to $ 32,000.
The opinions of the crypto community are divided. For example, some investors are still optimistic that buying Bitcoin at any cost is a good idea. Others are waiting for Bitcoin’s price to fall towards a new limit of $ 20,000.
(Disclaimer of liability: The author of this story is the CEO of Kyrrex Exchange)
Join Hacker Noon
Create your free account to unlock your individual reading experience.
Comments are closed.