When it comes to cryptocurrency, despite its world-changing power to overthrow the traditional banking system and kill fiat currency (according to some crypto proponents), there are two gatekeepers who determine whether it goes up or down: China and Elon Musk.
Today, it was China’s turn to line up Bitcoin and the other top ten cryptocurrencies in a firing squad and open fire.
Even though the crackdown on Bitcoin announced by China was known weeks ago, today China showed they are not bluffing with numerous mining operations shutting down. The price at the time of writing this is down almost 11% in 24 hours.
Now, Bitcoin is no stranger to price volatility, we’ve seen these kind of swings before. This is also not the first time China has set its sights on Bitcoin and cryptocurrencies, but this is probably the most aggressive we have seen them regarding crypto. China brought a nuclear missile to a knife fight and the nuclear option is almost always the most effective.
Who can forget the first cryptocurrency ban that China instituted in 2017 and the subsequent prolonged volatility that ensured after? Although to my knowledge, the ban was never lifted, China and its local municipalities turned a blind eye to mining operations as they sucked up the cheap electricity on offer, all the while amassing a concentrated network hash rate China accounts for around 75% of Bitcoin mining.
While miners are making money from computing those increasingly difficult cryptographic math problems, they are also ensuring the network operates normally and transactions are processed in a timely and safe manner. The less miners there are, the less efficient Bitcoin becomers.
It is kind of ironic when you think about it. Cryptocurrency proponents love to spruik their decentralised ideals and see crypto as a better alternative to fiat (which is in many ways). Still, at the same time, Chinese miners have centralised mining operations accounting for over 50% of mining (closer to 100% than 50%).
Where things get more concerning is China’s aggressive stance against Bitcoin mining in a country where collectively miners have control over the Bitcoin could allow it to order Bitcoin miners to perform rogue transactions on the network, resulting in a fork and some of the worse volatility that Bitcoin (followed by those beneath it) would ever see. Would China ever do such a thing? The fact they’ve ordered these mining operations shut makes it seem unlikely.
Many of these mining operations will look to move elsewhere, most likely colder, more crypto-friendly regions like Canada or a more likely candidate: Iceland, who are certainly no strangers to the perils of the corrupt banking/financial industry, the only country to jail bankers for what happened during the GFC.
Bitcoin is a threat to a country like China who is known for the tight controlling grip it has over its citizens, as well as other countries who do the same thing. Cryptocurrencies are a threat to monetary policy and government control, something an influential country like China want to stamp out before it becomes too big to control.
