The first quarter of 2021 has been a great time for BTC. However, this incredible bull run might have come to an end as Chinese authorities declared a ban on all crypto activities, such as mining and trading.
China declared these new restrictions after a meeting of the Central Financial and Economic Affairs Commission. According to the statement, payment businesses and financial institutions are prohibited from providing any service to facilitate cryptocurrency transactions. Additionally, it cautioned investors about speculative gambling, which may have serious effects on the safety of people’s land.
This is not the first time that China will probably be announcing a limitation on cryptocurrencies. In fact, it has declared many constraints since 2013, and it appears that these constraints always coincide with the crypto bull run when many individuals are involved with cryptocurrency trading. Back in 2013, it prohibited BTC payment chips; in 2017, crypto exchanges in the nation were closed, and in 2019, it issued warnings against cryptocurrency mining due to environmental harm and non-compliance.
However, none of those restrictions has had any significant effect on stopping cryptocurrency activities in China, and mining over the nation remains accountable for 65% of the BTC hash rate. However, these new constraints raise certain questions about the dangers of virtual currencies as they’re not backed by real price.
The timing of those new constraints also means that its influence on the value of BTC is much more significant. Additionally, world governments, leaders, and environmental organizations have been increasing concerns about the energy consumption and environmental ramifications of BTC mining in recent months.
One of the biggest supporters of BTC, Elon Musk, also recently declared his company, Tesla, will quit accepting BTC as payment because of its vehicles, citing environmental concerns. All these have had detrimental consequences on the value of BTC in recent weeks, as it’s lost almost half of its market value from its all-time summit due to massive sell-offs. Though it’s already stabilizing and Elon Musk has come out again to tweet positively about crypto, the value is to fully stabilize, and many dealers are still counting their losses.
With all the new constraints from China, the hash rate has decreased drastically to 147EH/s as mining businesses find alternative locations to prepare mining farms outside of China. According to Bybit, a global cryptocurrency derivatives exchange, it is not only the hash rate that has declined massively in recent months, but the mining difficulty also dropped by 16% from its all-time high at the end of May.
These declines provide miners the opportunity to earn additional profits. Since Bybit clarified, the mining economy is structured such that the price of BTC determines the hash rates. Therefore, even as the market conditions have changed, hash speeds will soon go back up despite Mining in China confronting fears, uncertainties, and doubts.
Closing Thoughts
Naturally, it’s too early to state what the long-term consequences of these constraints in China will be. But if preceding cases are utilized to predict how successful these new constraints will function, we can expect that cryptocurrency stakeholders in China will find a means around it. What’s more, since these extended limitations don’t prevent people from trading or holding cryptocurrency, the consequence of these constraints will likely be felt mostly by corporate bodies and registered organizations.
No one can say however when crypto will recover from its bear market. But how China restrictions on crypto pan outside and miners‘ reaction in China will play a determinant role. Additionally, the United States government has also announced plans to launch policy announcements on cryptocurrency from the coming months, which will also have a significant effect on if BTC recovers or not. If experience has taught us anything, crypto trading and investments require a lot of patience.
It is not offered or intended to be utilized as tax, legal, investment, financial, or other advice.
