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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.
BTC
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.
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