“Does China hate bitcoin. How China influences the cryptocurrencies market?”
Chinese media released a statement about tightening control over cryptocurrency exchanges and bitcoin mining. After this statement, the BTC rate fell by 15%, for the first time since February, the value of bitcoin fell to $31,000.
On May 21, the Chinese Finance Committee announced the authorities’ intention to introduce new measures to regulate cryptocurrencies in the country. In a statement, the authorities also criticized the use of cryptocurrencies, in particular bitcoin. The Chinese officials associated high risks in cryptocurrency trading with the fact that virtual currencies are “not provided with real values” and their exchange rate is easy to manipulate, and trading contracts with cryptocurrency are not protected by the Chinese law.
Immediately after the release of this statement on the network, the BTC rate began to plummet. This is not the first time China dictates the direction of the rate of cryptocurrencies, such news has caused a stir before, but why does so much depend on one country in the world of cryptocurrencies?
China banned cryptocurrency trading back in 2019, but it so happened that most of all mining farms are located in China. China has cheap electricity and Ashiki is produced here. Because of this, a kind of centralization of computing power was formed in one place.
The distribution of the global bitcoin hash rate by country (in other words, which country has more miners)
And that’s why crypto traders closely follow the news from China. Any ban or regulation by the government may affect the decision of investors to buy or sell digital assets. If Bitcoin mining is banned in China, then the hash rate of the blockchain will greatly decrease, and the rate of top cryptocurrencies will fall.
Last month, for example, power outages in Xinjiang Province were caused by a coal mine disruption. About 80% of China’s miners have temporarily stopped working. This led to a panic in the cryptocurrency market and a 10% drop in the BTC rate, all due to the fact that too many mining farms were dependent on one state.
Due to the tightening of control, miners will most likely install their farms not in China, but prefer the countries of South Asia, where electricity also costs a penny, but the government does not actively intervene in the world of cryptocurrencies.
When mining farms are distributed more or less evenly around the world, China will lose power over the rate of cryptocurrencies, or at least decrease. I am inclined to believe that when the bulk of mining farms move to other countries, the rates of bitcoin and other top currencies will skyrocket.
China’s regulations and the recent announcement by Elon Musk that Tesla will stop accepting bitcoin have reduced the total cryptocurrency capitalization by $ 500 billion, and now the cryptocurrency market has sagged, but not for long. Along with the miners, China is losing the levers of power with which the country could influence the rates of cryptocurrencies. In the future, there will be less news related to China, but capitalization of the cryptocurrency market will undoubtedly only increase.