Mining and China’s bans.

By 26/05/2021News

Gold  1906,385

EURUSD   1,2261

DJIA  34368,50

OIL.WTI  66,045

DAX   15477,50

The Chinese authorities have issued a statement that they will crack down on cryptocurrency mining. Immediately after the news broke, bitcoin collapsed again. It seemed as if the sky had fallen to Earth. But what does China’s mining ban really mean for the market? Let’s get to the bottom of it.



Today, up to 2/3 of bitcoin mining capacity is located in China. The ban means that all large, officially operating companies will be forced to shut down production.
What happens next? Next, they will move the equipment to other countries and reopen. Or they will simply sell the equipment to other companies. There won’t be any problem with that, given the huge shortage of asics on the market.
Bitcoin mining will not be affected in any way. A new block in the network is mined about once every 10 minutes. And with or without the closure of mining in China, the same amount of bitcoins will be mined in a month. Where is this panic selling coming from then? Because many traders don’t understand this simple thing.
Now for the more difficult part, which few people think about at all. What does it mean to move equipment to other countries? It means using more expensive electricity. Huge capacity has been deployed in China precisely because of the world’s cheapest access to an electrical outlet.
What’s the threat to bitcoin from a more expensive outlet? It doesn’t threaten anything. What’s more! It’s exactly the opposite. More expensive electricity will mean a more expensive cost of mining new bitcoins. And this is precisely not a bearish signal, but an extremely bullish one. That is, from some level miners will simply not sell mined BTC, expecting the price to rise. And that level, after the transfer of mining and China, will become much higher.
And another extremely important point, which will pay off over the next few years. There was a lot of talk that China could take over the BTC market, at the expense of mining. That risk is now a thing of the past. Bitcoin mining will become much more decentralised. This will lead to even more trust in the first cryptocurrency.
So the market was wrong? The market is always right! The traders discounting BTC on emotion were wrong.

04.00 New Zealand National Bank interest rate decision
05.00 New Zealand National Bank Press Conference
10.00 ZEW Swiss Economic Expectations Index for May

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.