August 16, 2019
Bitcoin News

The crypto community reacts to China’s changes in Bitcoin mining policy


China’s lawmakers are studying 450 industrial activities that are considered to be potentially unsafe, wasteful of natural resources, or not green enough. And why should you care, I hear you ask? Bitcoin mining is among those activities, and most of the world’s cryptocurrency miners (of Bitcoin or other digital assets) are in Mainland China.

That is so because of two main reasons: the hardware needed for mining is cheaper to buy in China (where it’s manufactured for the most part), and the electricity costs are also affordable there. The last reason is particularly important given the insane amount of energy it takes to create new blocks for the Bitcoin chain.

The crypto verse community doesn’t seem to be particularly worried about this. This isn’t the first time that the Chinese government shows hostility towards cryptocurrencies (Bitcoin, notably), so most analysts and observers have grown used to threats. And some users would even welcome such a development because that would spread the Bitcoin’s network mining labor more evenly around the world thus helping a lot with the network’s decentralization.

The Cryptonauts express themselves on the Chinese Mining Ban

The South China Morning Post is the source of this news. It reported how the National Development and Reform Commission (in China there are commissions for everything) published (not clear if it was an official communication or a leak, but being China it must have been official) a draft list of industrial tasks that the government would like to either restrict or ban, and that the list included cryptocurrency mining.

China dominates the world’s infrastructure for Bitcoin mining. It’s the country that manufactures the toys that can do the tough trick of finding new blocks for the chain. And it’s also the country with the most miners in the world by far. So the news was somewhat disrupting in the crypto industry, and many cryptonauts had something to say on the subject.

Mr. Emin Gün Sirer (@el33th4xor) had this to Tweet about it:

He doesn’t sound all that worried about BTC’s prospects.

Mr. Gun Sirer is a professor at Cornell University, and he’s also the founder of the Labs. The academic was keen on dispelling any FUD and clearing up misunderstandings caused by overly emotional interpretations of the breaking news. As he wrote, the rig’s manufacturing won’t stop, and this news will not be the end of Bitcoin by any means at all.

Other cryptocurrency analysts, observers, and investors were not that impressed by the news either and just disregarded it for the most part.

China has been bouncing among hostility and friendliness towards cryptocurrencies during the years so it’s kind of difficult to assess what its long-term position will be because it could flip sometime soon as it’s done in the past.

In the big picture, China has not been all that welcoming to cryptocurrency. Not as a financial technology nor as an asset class. Even less so as a potential substitute for money. And that makes all the sense in the world because Bitcoin (as well as most cryptocurrencies) are impervious to external authorities and are hardwired for independent and organic monetary policy while China’s government likes to keep very tight control over the country’s fiat currency.

How will this affect the price?

Well, so far it hasn’t. If it’s had any effect at all, it’s been remarkably weak, utterly impossible to notice.

Professor Sirer had something to add on the subject of price as well “Historically, news of this kind (aka “China FUD”) has been correlated with price upticks. Though as far as consumer-affecting FUD goes, this is pretty weak. The impact is on miners, not regular users.”

Bitcoin is trading at USD 5,047, which means it’s testing the USD 5.100,00 critical resistance level after last week’s incredible surge that saw it going from $4.000,00 to USD 5.000,00 in just an hour. The market sentiment seemed to be more bullish than bearish initially, whatever the news was from China, and even if said news appears to threaten the network’s largest source of blocks.

So it’s irrelevant for the price so far. But there’s more. If the ban happens, it could be a good thing for the Bitcoin network according to the very same Cornell professor.

The ban would terminate China’s dominance in the industry, and it would be a good thing for the network to be away from China’s greedy government who, as things stand, could shut down the Bitcoin network (in practical terms) just by isolating the Chinese miners from the rest of the world. If the ban passes, that threat disappears.

So yes, the ban could happen, but no, it’s not going to be the end of the road for Bitcoin. It could even improve the network and make it safer. And it’s making no dents at all in the digital asset’s price.

The potential ban sounds like a potential tragedy for Bitcoin, but as things have developed so far, chances are it would be irrelevant. Keep in mind that Bitcoin currently has a lot more miners than it needs because the 2017 bonanza made a lot of opportunistic investors interested in mining.

So the competition is fierce, but the network can keep functioning even if a great deal of the current miners have to stop mining. Maybe there would be a bump in the network’s functionality but, things would even out pretty quickly because the diminished level of competition to create new blocks would be a great motivator for people outside of China to get in the mining game and make up for the lost Chinese miners.

This is not the time to make radical moves. If last week’s surge in the BTC price has made you euphoric, then you should not trade at all until you calm down. By the same crypto-token (pun fully intended) if news such as a possible Chinese ban fill your mind with terror, you shouldn’t be trading either for a few days until you, as well, manage to calm down.

Any seasoned investor will tell you that good fresh information is the main ingredient in the recipe that makes a successful trader. That and timing. So knowing the current news is, for sure, a good thing. Information is power. But make sure to process your information rationally and make sure you don’t overreact, especially to this piece of seemingly grievous news that has changed nothing at all in the markets.

Last but not least: there is no ban yet. It’s under consideration by some obscure agency within the Chinese government. It’s not even decided if mining will stay in the final list, as the published item was nothing but a draft. So monitoring the situation will surely pay off in due time. But for the time being, nothing is really happening.

[Image courtesy of Pibabay]

Disclaimer: All information provided through this article should not be regarded as investment advice, nor should be taken for granted for crypto trading purposes. Before making any investment or trading plans, make sure to inquire about the information diligently by carrying out your very own research. Thank you.

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