When China’s bitcoin crackdown took effect, many speculated that the industry would never recover. Surprisingly, however, the ban has served to highlight both the resilience of the sector and the entrepreneurial spirit of the miners who turn the wheels of blockchain.
Although the People’s Bank of China (PBOC) ruled crypto-related activities illegal in September, bitcoin had a record year in 2021, breaking its previous price record (ATH) as institutional players joined the party. . Far from sounding the death knell, the much publicized ban has barely had an impact on all things.
Dissecting China’s War on Crypto
Anyone who has paid attention will know that China has never been positive about bitcoin. As CoinShares chief strategy officer Meltem Demirors insolently noted in September, “This must be the 20th time that China has banned bitcoin.”
So why was this particular crackdown any different? Essentially, because all the cards were now on the table and all the powers of the state were called upon to enforce the ban. While in the past, Chinese financial institutions were prohibited from providing cryptocurrency-related services, now all cryptocurrency-related activities, including trading and mining, were prohibited.
In what has been dubbed the “great mining migration”, miners based in provinces such as Xinjiang, Inner Mongolia, Sichuan and Yunnan quickly de-energized their platforms and fled to new pastures. : Kazakhstan, Russia and North America. In the meantime, the hash rate dropped 50% before rebounding impressively.
Admittedly, there are many reasons behind the banning of bitcoin in China. Not only have lawmakers been frightened by asset volatility, but they, like various governments around the world, have been troubled by their inability to influence it. Additionally, the energy-intensive nature of bitcoin mining – some 40% of China’s bitcoin mines were coal-fired by some estimates – threatened to undermine Beijing’s commitment to achieve carbon neutrality by 2060.
Of course, it didn’t take a genius to realize that the CCP was unsubtlely diverting the spotlight to its own state-backed digital currency. According to experts, the PBOC will likely be the first to launch a full-fledged CBDC.
In light of subsequent events, China’s withdrawal from the scene can only be viewed in a positive light. After all, consider what has happened since the ban was announced: bitcoin hit a new high of over $ 68,000; the first BTC futures exchange-traded fund (ETF) launched in the United States, allowing investors to buy and sell exposure to the asset off-exchanges; and the United States has become the dominant mining center of the world.
This last point deserves to be underlined: the dominant mining site is no longer an authoritarian country but a democratic one. Additionally, as Chinese politicians followed the line and disparaged bitcoin at every opportunity, several U.S. policymakers embraced the asset class, making plans to accept bitcoin tax payments and even let employees get their paychecks. in bitcoin.
U.S. investors are also likely to be reassured by China’s diminishing influence on the mining landscape. Especially since companies like Lancium are investing heavily in Texas bitcoin mines that run on renewable energies.
Green shoots of progress
To say that there has been a green revolution in bitcoin mining might be golden, but there has certainly been a resurgence of interest in sustainability this year. Last 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.
Featuring 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 board is committed to standardize energy reporting requirements and sustain the industry.
Efforts in places like Texas are also expected to help with that mission: about 16 gigawatts of new wind and solar projects are expected to be built in West Texas over the next year alone.
Against this backdrop, it’s no surprise that bitcoin continues to thrive, especially among institutional investors. According to the latest CoinShares entry report, bitcoin registered over $ 114 million in institutional entries at the end of November, despite a 12% price drop. The recent ETF, meanwhile, generated $ 1 billion in assets under management in its first two days, becoming the fastest fund to hit the milestone.
After a tumultuous year, bitcoiners are now looking to 2022 and speculating on the next publicly traded company to add BTC to their balance sheets. In the years to come, China’s bitcoin ban could be seen as a positive turning point for the industry.
This is a guest article by Sadie Williamson. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.