Ignored throughout the bull run, China is once again trying to make itself relevant by employing its classic approach of bitcoin doom. Since MT Gox has gone in 2014, China has been the main source of FUD over and over again, with this time some committee declaring they want a crackdown of bitcoin mining and trading.
On trading they have been cracking down since 2017, which is why during this bull run no one paid any attention to China with the country isolating itself where the crypto boom is concerned. Crackdowns on mining have also been an occasional theme. Some local authority here or there publishes some diktat about ree bitcoin mining now and then, but generally nothing happens.
The mood in China appears to be much of the same. GPU prices are not falling. The feeling is instead that Beijing is yet again all bark and no bite.
Some however are not missing the opportunity to suggest Beijing is serious with some rumors Huobi Pool was cutting off Chinese miners, when they were just suspending their cloud mining service. We asked why without a response in time for publishing.
The market action is now being attributed to this, although price fell before all this, and while some see doom, the medium to long term consequences of any crackdown on miners would likely be very beneficial not just for bitcoin, but also for America and Europe.
Which is why some suggest this is all bark, but if they do bite, they would do to wide applause at least among some bitcoiners as asics come back home.
The west and China had a very simple agreement, this generation was told. We provide the brains, they provide the hands.
Investment thus flooded to China and this space honored them with hosting the second Devcon in Shanghai as some of the smartest in the east and the west collaborated to build pretty cool new toys and envisioned to build even cooler ones in effectively giving machines a very primitive ability to act and ‘think’ – albeit what they have been told to ‘think’ – through combining advances in wi-fi, sensors, blockchain tech, and other new technologies that had been in development for years and were finally ready for use, at least experimentally.
It so happened that China decided without warning to renegade on this implicit understanding by effectively kicking out the ‘brains’ and keeping the toys.
Asics were not invented in China nor were they first developed there. They were invented in the west as almost everything in this space, and were effectively handed over to China because of this implicit agreement. We build the toys there because we can just export them back as there’s a huge untapped labour capital and because it’s still our toys.
Nationalism for some reason did not quite enter this equation developed by the boomers and lectured to the millennials, but with China’s banning of crypto exchanges in 2017, it became quite clear we had been lectured not maths but sophistry.
The current equation is instead that China maintains its export producing capabilities – bitcoin mining – while prohibiting the consuming aspect in banning exchanges, which translates to prohibiting western incentives to get involved at all in their country since there is effectively no longer a China crypto market.
In theory, in practice the Chinese leadership is arguably very confused with contradictory actions and statements which may well derive from the inability to ban bitcoin.
Yet while there is in practice still a Chinese crypto market, it is largely the case that the authorities are too hostile for pre-2017 style toy building collaborations to thrive.
Thus a trend is developing that is leading to a mining boom in both America and in Europe which is very quietly but fundamentally transforming bitcoin mining with the pictured Greenidge Generation bitcoin mining farm and power plant in New York being just one example.
Asics Are Coming Home
The fall of China where cryptos are concerned either began or accelerated with the rise of stock traded crypto miners. They were almost non existent prior to this bull run. Now we learn of a new one almost every day.
We also learn of new initiatives. Crucially, some of them have begun funding asics development and manufacturing in the west. This will take some time, but by the end of this boom the crypto mining scene will likely be completely transformed and we may once again see yet another revolving of that wheel in mining dominance.
This is happening because there’s a market for it. There’s a lot of money to be made from crypto mining, and both America as well as Europe have plenty of remote areas. Where western authorities are concerned, they have generally been hands off and some have even tried to attract bitcoin miners. These are high tech innovative computing businesses and very much at the cutting edge.
Where bitcoiners are concerned getting back our toys is very important so that we can continue where we left and start playing again. Many bitcoiners therefore are funding western miners with Bitfarms being just the latest to raise C$75 million which will go towards bringing more asics back home.
Since these miners are funded through stock shares, all this also directly benefits bitcoin holders as these miners can raise capital through the stock market rather than only through selling bitcoin.There’s a trend therefore in funding them with some even ignoring fundamental measures like P/E because they indirectly benefit through these miners not bringing in new supply at the same rate as some Chinese farm.
As such Chinese bitcoin farmers were already set to face intense competition, as will Chinese asics manufacturers very soon.
This talk of a crackdown on Chinese miners therefore to some was very good news because it will accelerate further this trend and may even send a lot more funding towards western asics developers and manufacturers, so effectively bringing back our toys home.
Which is why plenty don’t believe China will actually crackdown, more just bark. But if it does do, then nothing will happen from a technical perspective as the hashrate will just adjust, and once it does western miners will be twice as profitable as before if we go by the estimate of 50% of bitcoin miners being in China which is probably more maybe 40%.
If western miners become twice more profitable, then they’ll get twice the funding, and bitcoin holders will see twice less new bitcoin supply which may be a continuous trend as some move more quickly towards both manufacturing asics as well as mining with them.
Price wise some of the newer crowd may well react, but for the more informed ones it should be a nice accumulation opportunity as any adverse effect is probably sentimental and short term, while beneficial effects are very likely fundamental and long term.
The actions of the Chinese Communist Party therefore do not matter as bitcoin’s inherent incentives have already set on course the beginning of another revolving on that mining dominance wheel. What does matter is that we bring our toys home and in that regard CCP can only speed that up as they are now becoming completely powerless to adversely affect global bitcoin.