Why Bans in China are a Plus for Cryptocurrencies
Chinese bans have led to the sale of cryptocurrencies, and the heads of JPMorgan (NYSE:JPM) and Goldman Sachs (NYSE:GS) have again declared Bitcoin an undesirable investment (which does not prevent them from promoting their own crypto trading platforms). However, there is a positive groundwork in the Chinese bans, which will strengthen the position of digital currencies in the future.
The leading advantage of Bitcoin against fiat money is decentralization and independence from financial institutions: they can no longer be printed to cover holes in the budget or banned from being used by other states.
China, according to various estimates, has 50-65% of the Bitcoin hashrate. This worried US Director of National Intelligence John Lee Ratcliffe: last year he recommended to SEC Chairman Jay Clayton to allow American companies to compete with China in the field of digital currencies. However, the Celestial Empire itself withdrew from the game and, after successfully testing the digital yuan, banned mining. Now miners from China are traveling all over the world in search of the most profitable option.
The erosion of China’s share in the global hashrate makes Bitcoin more stable in the future. The next largest country – the USA – has only 7-10%. Therefore, possible mining bans in other countries will have less impact on the stability of the network and the value of the cryptocurrency.
The rejection of Chinese capacities has a positive effect on the environmental friendliness of mining, which has become fashionable to talk about after the pirouette of Elon Musk. In China, as in the entire Asia-Pacific region, coal is actively used to generate electricity, which causes the greatest harm to the environment.
Now Chinese miners are being offered favorable conditions by countries rich in nuclear and hydropower, and a number of pools are going to use exclusively green energy.
A driver for the economy
Miners will attract investments in certain regions. For example, Chainbytes plans to open a center for the production of crypto atms for North and South America in El Salvador. This will lead to the opening of new vacancies and to the professional development of local specialists. And Kazakhstan, where the TOP-5 mining pool migrates, is considering the introduction of an additional tax on crypto mining of 1 tenge per kWh, which will increase the annual budget by about 3.6 billion tenge ($8.4 million).
The fall of the market opens up opportunities for those who hoped to enter at more favorable prices. The financing rate of perpetual futures contracts has also returned to normal, making it easier to hold positions with leverage.
In addition, in China’s domestic market, the cost of used video cards actively used in Ethereum mining has decreased by 30% from the highs of May. And the leading manufacturer of ASICs, Bitmain, announced on June 24 that it was stopping sales to help miners sell used devices.