China issued yet another warning about cryptocurrencies…and nobody cared.
Bitcoin’s decentralised properties make it impervious to repeating FUD. Sooner or later, the effect wears off and we all move on - just as quickly as the Bitcoin miners did, finding new homes in Kazakhstan, the USA etc
And not without consequence in China. The mining exodus reduced demand for renewable energy:
Many hydropower stations have become unviable and now being sold. Bitcoin really does incentivise renewable energy capacity.
Others have noted that China has “banned” Bitcoin seemingly dozens of times over the years, only to soften its stance later. This time, it really is different. Take a look at this timeline - you might need to zoom in on a mobile device. It has been a sustained assault on Bitcoin by the second largest economy in the world.
How did Bitcoin respond?
Since it became apparent that China was serious this time and shut down mining, it had a predictable effect on the hashrate, but the blocks kept being churned out - like clockwork :)
The hashrate has bottomed out and started forming a recovery. We can attribute 3 reasons for this:
Bitcoin miners gradually starting up again in new locations.
The largest ever downward adjustment to mining difficulty, effectively making it more profitable to mine BTC, thus incentivising miners around the world to bring more capacity online:
What about price?
Bitcoin has experienced a ~50% “crash” since peaking in April. But most of that was priced in before China’s crackdown on Bitcoin. The effect of China’s ban has been negligible.
While it’s too early to say a price recovery is on the way, Bitcoin has been trading in a range for weeks in what looks like a solid base for recovery, and the bullish among us have good reason to believe the second half of 2021 will see considerable price appreciation (I’ll dedicate another post to that soon).
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