China could blacklist Bitcoin miners in the future. The restrictions are likely to tighten the miner’s exodus from the country. Coin Metrics explains why this is a positive development for the Bitcoin ecosystem.
Gradually the crypto market is shaking off the dust and making up for the losses of the past few days. Total market capitalization has caught up five percent in the past 24 hours, adding around $ 500 billion since it bottomed out last Sunday. If the race to catch up keeps up, the 2 trillion mark could fall again in a few days. Bitcoin is also reanimated and has caught up to $ 3,000 since yesterday’s low. At the time of going to press, Bitcoin is trading at $ 39,456, just missing out on the 40,000 mark.
A breath of fresh air is blowing again on the altcoin market. Ethereum is up nine percent on a daily basis and is rapidly approaching the next thousand at $ 2,850. Due to the price jump, the weekly loss is limited to a minus of 16.9 percent.
Binance Coin (BNB) is also pulling along and has risen by seven percent in the last 24 hours, Cardano (ADA) even posted a price increase of twelve percent. XRP is increasing by four percent, while Dogecoin (DOGE) is stagnating with an increase of one percent compared to the previous day. Polkadot (DOT) is one of today’s top performers among the ten largest cryptocurrencies with a plus of ten percent, but has also made up the biggest gap with a minus of 42 percent in a weekly comparison. The freshly baked Internet Computer (ICP) keeps up with a plus of 3.4 percent on a daily basis.
China is tightening the thumbscrews for miners
While the market continues to recover from the crash, the course in Bitcoin mining is being reset. Last week, the message leaked through the crypto space that the Chinese government wants to regulate the mining of crypto currencies even more tightly in the future. As early as the end of April, Beijing published an emergency notice on stricter control of mining data centers. Since then, the Office for Business and Information Technology has required operators to provide precise information about mining activities and electricity requirements.
These requirements now seem to be tightened. Inner Mongolia’s Development and Reform Commission has one Chinese report according to now proposed to blacklist miners who violate the new regulations in the province from the social credit system of the country. Bitcoin miners are threatened with sanctions such as travel restrictions, restricted access to the financial market, throttling of the internet speed or even higher tax levies.
Bitcoin hash rate in upheaval
The announcement should not remain without consequences. Inner Mongolia, along with the Sichuan and Xinjiang regions, is one of the absolute hashrate hubs in China. The first miners have already drawn conclusions from the new regulations and have stopped their on-site services.
This mixture has already left its mark on the Bitcoin hash rate. Last week, as part of the new regulations, the average hash rate fell from almost 200 to 106 EH / s in just two days, as shown in the graphic from Glass node shows. At 152 EH / s, the hash rate has currently leveled off in the middle between the two extremes.
“One of the most positive developments for Bitcoin”
This may seem worrying at first, but the opposite is the case, like the on-chain data platform CoinMetrics rolled into one report holds on. The upheaval marks a “gigantic opportunity” for the hash rate to part with two legacy issues: the dependence on Chinese miners and its carbon footprint.
With that in mind, the timing of the latest wave of regulatory review by the CCP could not have been better. The subsequent exodus of miners that is taking place now is one of the most positive fundamental developments for Bitcoin in 2021. Even if we see short-term declines in monthly implied hash rate numbers as miners migrate, it would be for an important purpose.
The long-term benefits would significantly outweigh the short-term consequences, such as an increase in block time. And a higher block time would only be a short-term phenomenon that will resolve itself the next time the mining difficulty is adjusted.
The anti-crypto course of the Chinese government, which is also explained by the imminent introduction of the digital yuan, offers a huge opportunity for the Bitcoin ecosystem to emancipate itself from the arbitrariness of a surveillance regime and at the same time to raise the ecological balance. US companies in particular sense the possibility of taking over more mining market shares here. In doing so, they too will have to adhere to stricter environmental requirements. The times in which mostly dirty cheap electricity was used for mining for cost / efficiency reasons seem to be over. In this regard, the newly formed lobby association “Bitcoin Mining Council” is supposed to monitor compliance with the guidelines in the USA. Here you can find out what the Council is all about and why this merger should also be viewed with a critical eye.