Crypto investors are on edge…and, can you blame them? Bitcoin dipped below $30k before recovering on Tuesday as news sunk in that China means business. The CCP is cracking down on crypto; after banning crypto exchanges, China is now looking to outlaw bitcoin mining.
Though China is pointing to the environmental hazards of bitcoin mining, its moves may have more to do with control. The country recently unveiled its “Digital Yuan,” which enables Chinese authorities to track all spending. So, it stands to reason that the government would prefer its citizens to use the digital yuan, as opposed to cryptos that are less easily traced.
Crypto mining in Inner Mongolia was shut down in May. And now, authorities in Sichuan are following suit, as miners scrambled to move their equipment outside the country.
But, before investors throw in the towel on bitcoin, there may be some benefits to sthe Chinese crackdown on crypto mining…at least, for the U.S. tech community.
U.S. New Crypto-Mining Hub?
Mining is crucial for blockchain technology. For a transaction to be verified, a user needs to solve a series of increasingly complicated equations. This “mining” uses a great deal of processing power and energy.
China has some of the cheapest energy prices in the world, which is why it dominated crypto mining.
After the crackdown, many miners will be moving to the U.S. States like Texas and Florida could become new hubs for crypto mining.
The U.S. has relatively cheap energy prices. And, the Constitution makes a Chinese-styled crypto crackdown less likely. Importantly, there may be ways for U.S. companies to reinvent how mining is done — so that it’s less energy intensive.
States like Florida and Texas, meanwhile, have many crypto supporters–including Texas Governor Greg Abbott and Miami Mayor Francis Suarez. Some crypto investors hope that the expansion of mining in the U.S. could make crypto go mainstream.
However, there’s also a risk of crypto becoming too politicized. Crypto mining has come under fire for its supposed negative effects on the climate. Climate change could be used as an excuse to shut down or scale back crypto mining operations in the U.S.
The Great Crypto Crash?
The move has had cryptocurrencies lose their value rapidly. Bitcoin fell below $30,000 on Tuesday, down more than 50% from its all-time-high value.
What’s worse, the Bitcoin price chart is exhibiting the dreaded “death cross.” That’s what investors versed in technical analysis call it when a 50-day moving average crosses the 200-day moving average.
That’s what’s happening to Bitcoin:
As expected, meme coins like DOGE were hit even harder.
This has had many crypto investors running to the hills. Does the Chinese crackdown really mean an end to crypto?
The Tech Is Here To Stay
No, cryptocurrencies aren’t done. No matter what happens in China, blockchain technology is here to stay.
No government can ban technology in the long run. China can try to ban crypto, just like it tried banning Winnie the Pooh. If people want to use it, they will.
Sooner or later, blockchain will enable real, blockchain-based decentralized finance, with lightning-fast transaction speeds and with no need for regulators and central banks. No authoritarian government will be able to do anything about it.
Crypto May Still Drop Significantly
That being said, cryptocurrencies are still highly speculative assets.
Investors can’t rely on fundamentals to predict crypto prices. There’s really no telling where any given crypto will be in the future.
Ultimaltely, Bitcoin’s value only depends on the beliefs of market participants. Just like the dollar. The Chinese crackdown is mostly important for its effect on market sentiment.
As the crypto space matures, the large price gains will likely stop. At that point, many investors may start to question why they are holding assets that don’t give yields.
The crypto space is definitely worth following in the future. When speculating, however, proceed with caution.