When China’s crackdown on Bitcoin took effect, many speculated that the industry would never bounce back. Amazingly, however, the ban has helped highlight both the resilience of the sector and the entrepreneurship of the miners who keep the wheels of the blockchain going.
Although the People’s Bank of China (PBOC) declared crypto-related activities illegal in September, Bitcoin had a stellar year in 2021, breaking its all-time high (ATH) when institutional actors joined the party. Far from being a death bell, the much-invoked ban had little effect on the overall system of things.
Analyze China’s war on crypto
Anyone who has paid attention will know that China never rated Bitcoin positively. As Meltem Demirors, Chief Strategy Officer of CoinShares, cheekily stated in September: “This must be the 20th time that China has banned Bitcoin.”
So why was this particular crackdown any different? Basically because all the cards were on the table and all state powers were used to enforce the ban. While Chinese financial institutions have historically been banned from providing cryptocurrency-related services, all cryptocurrency-related activities – including trading and mining – have now been banned.
In what is known as the “major mining migration”, miners in provinces such as Xinjiang, Inner Mongolia, Sichuan and Yunnan quickly switched off their drilling rigs and fled to new pastures: Kazakhstan, Russia and North America. Meanwhile, the hash rate dropped as much as 50% before recovering impressively.
Of course, there are many reasons for the Bitcoin ban in China. Not only was lawmaker terrified by the volatility of the asset, but also, like various governments around the world, concerned about its inability to influence it. In addition, the energy-intensive nature of bitcoin mining – around 40% of China’s bitcoin mines run on coal, according to some estimates – threatened to undermine Beijing’s commitment to carbon neutrality by 2060.
Of course, it didn’t take a genius to realize that the CCP was quietly shifting the limelight to its own government-sponsored digital currency. According to experts, the PBOC will likely be the first to launch a full-fledged CBDC.
China’s withdrawal from the stage can only be viewed positively in view of the events that followed. Always remember what has happened since the ban was announced: Bitcoin hit a new all-time high of over $ 68,000; the first exchange-traded BTC futures fund (ETF) launched in the United States that allows investors to buy and sell exposure to the asset outside of the exchanges; and the United States became the world’s dominant mining center.
The latter should be emphasized: The dominant mining location is not an authoritarian, but a democratic country. While Chinese politicians took to the line at every opportunity and blamed Bitcoin, several US politicians have embraced the asset class, making plans to accept tax payments in Bitcoin and even let employees get their salaries in Bitcoin.
The dwindling influence of China on the mining landscape should also reassure US investors. Especially since companies like Lancium are investing heavily in Texas Bitcoin mines that run on renewable energy.
Green shoots of progress
To say there has been a green revolution in bitcoin mining may gild the lily, but this year there has certainly been a renewed focus on sustainability. Back in May, Elon Musk and Michael Saylor announced the formation of the Bitcoin Mining Council, a company focused on promoting the adoption of greener mining initiatives.
With many of North America’s largest Bitcoin miners – including Argo Blockchain, Blockcap, Core Scientific, Galaxy Digital, HIVE Blockchain, Marathon Digital Holdings, Riot Blockchain, and Hut 8 Mining – the council has committed to standardizing energy reporting requirements and ensuring that To make the industry future-proof.
Efforts in places like Texas should also help with this mission: In the next year alone, around 16 gigawatts of new wind and solar projects are to be built in West Texas.
With this in mind, it should come as no surprise that Bitcoin continues to thrive, especially with institutional investors. According to CoinShares’ latest inflow report, Bitcoin saw over $ 114 million in institutional inflows in late November, despite prices falling 12%. The latest ETF generated $ 1 billion in assets under management in its first two days – making it the fastest fund to ever hit the milestone.
After a turbulent year, Bitcoiners are now looking to 2022 and speculating about the next publicly traded company to add BTC to their balance sheets. In the coming years, China’s Bitcoin ban could be seen as a positive turning point for the industry.
This is a guest post by Sadie Williamson. The opinions expressed are solely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
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