London Bridge is Falling Down
London Bridge is falling down (metaphorically speaking) – crushing many cryptocurrency traders hope of another bull run to pieces – painting our portfolios in red. Although I liked the color red, I certainly don’t like to see it dotting my portfolios. And in all honesty, who does?
A couple of days ago, the cryptocurrency market experienced another crash as the price of Bitcoin (BTC) plummets even further and taking other cryptocurrencies like Bitcoin Cash (BCH) along with it. Certainly, the market moving up and down is a common thing, and considering how volatile cryptocurrency is, it’s kind 0f expected.
But my problem with the latest crash though is not that the market is being too volatile or that it crashes but why the market crashes. And I can tell you why Bitcoin tumbles even further while dragging down all other cryptocurrencies along with it in a single word: China
Government Crackdowns
According to some data from Cambridge University, Chinese cryptocurrency miners account for about 65% of Bitcoin’s hash rate in the world, an incredibly large percentage of the global Bitcoin hash rate. With such a large control over the global hash rate, whatever is happening in China would affect the price of Bitcoin as well which is exactly what we're experiencing right now.
Last May, the local government in Sichuan, China, closes several major cryptocurrency mining projects in the province. This was done under the Chinese government’s order to strengthen and expand the crackdown against Bitcoin mining and trading in the country. Sichuan province was China’s second biggest Bitcoin mining bases so when the ban on mining was implemented the effect was felt worldwide.
Not only that, the government also ordered the banks in China, under the Central Bank of China to tighten the crackdown on cryptocurrency trading – adding more to the woes of miners and traders in the country.
But all of that is not enough for the Chinese government. Last Friday, the authorities in the southwest province of Sichuan ordered the closure of the many more Bitcoin mining projects which once again send the price of Bitcoin tumbling even further. And when the price of Bitcoin plummets, other cryptocurrencies are sure to follow.
One might ask why the Chinese government was so adamant on cracking down on Bitcoin and other cryptocurrencies despite the positive impact of cryptocurrency mining and trading on their economy. Well, the answer to that was actually quite simple: Control.
The Chinese government wanted full control of all cryptocurrencies in their country, especially Bitcoin. It was for this reason that the government hasn’t announced a total ban on cryptocurrency yet. This was actually nothing new. A few years back the government also strengthened the crackdown on Bitcoin mining. But not long after the government had a sudden change of heart and eventually loosened on the crackdown.
But not long after the introduction of the Digital Yuan, the government renews their crackdown on cryptocurrency. Indeed. It could be said that the crackdown happened because of the Digital Yuan. As the state approved digital currency, the government doesn’t want any competition for the Digital Yuan. And to be honest, that’s only expected.
After all, unlike Bitcoin and every other cryptocurrency, the Digital Yuan was under the Chinese government’s control. Which mean they could do anything they wanted to the digital currency – including setting its value, right?
Being under the control of the government the Digital Yuan would be less volatile in comparison to Bitcoin which is usually under the whims of the whales, and a certain billionaire technocrat *cough* Elon Musk *cough* who loved to flex his influence.
A Market at Risk
China wanting to control cryptocurrency in its soil was only expected and understandable. Showing support for its own digital currency was also only natural. But the problem is, what’s happening in China is also influencing the rest of the world which is, putting it lightly, a bad thing.
If the Chinese government gains control of the supply of Bitcoin and other cryptocurrencies through forcibly seizing them from Chinese miners and traders, it’ll be a terrible thing for the cryptocurrency market. If they already have this much influence on the market by simply implementing bans and crackdowns imagine what they could do once they have the actual cryptocurrencies.
Some of you might scoff at what I’m writing in this article but you shouldn’t dismiss it so easily. After all it’s not out of the realm of possibility. If you been following the news and been doing your own research about China then you should know that the Chinese government is more than capable of seizing their own citizen’s properties.
Although the government hasn’t announced a full ban on cryptocurrencies yet, who said they won’t do so in the near future? Let us not forget that China now have its own digital currency, the state-supported Digital Yuan. If by banning and seizing Bitcoin and other cryptocurrencies could benefit the Digital Yuan, then the Chinese government would do it in a heartbeat.
The only way to stop this from ever happening is move majority of all Bitcoin mining project out of China into countries that supports cryptocurrencies. Of course putting all of our eggs in one basket is never a good idea. After all if the basket falls then all eggs might break. Besides, diversifying greatly reduces the risk.
Thankfully, most people understood this logic and are now moving out of China. For example, the Shenzhen-based BIT Mining reported that they’re moving out hundreds of their mining machine to Kazakhstan, a country in Central Asia that neighbors China. Still not out of the reach of China but it’s a start.
What I really want to see though is a mass exodus of most if not all Bitcoin mining projects out of China which is very likely to happen thanks to the Chinese government’s hard stance on cryptocurrency. Since the government disliked competition for their Digital Yuan, might as well move somewhere, right?
Anyways, with the current atmosphere in China, moving out of the country would be for the good of all with the exception of the Chinese people that, depending on their government’s action, might just lose access to decentralized cryptocurrency such as Bitcoin.
FIN~
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Lead Image: Pixabay
Image Source: Pixabay
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