Despite suffering from several restrictions by the Chinese Communist Party, Bitcoin is still working in China, and it seems to operate almost as it normally used to. The hash rate recovering and steady volume indicates that the attempt to kill Bitcoin has failed.
What Is Happening In China?
After a two-week notice, the Chinese Communist Party banned mining Bitcoin in most regions of China, generating a decrease of 50% in bitcoin mining. This was unfavorable for Bitcoin, considering that Elon Musk not so much time ago declared that Tesla was no longer receiving Bitcoin as payment for Tesla due to the damage to the environment that mining Bitcoin produces.
On June 16 China obstructed crypto exchanges, including Canadian ones, in web results. Later, China called for the closedown of companies that were suspected of giving software services for crypto transactions. In addition, they warned companies not to give services linked to cryptocurrency. Besides, the People’s Bank of China announced the banks to shut down the accounts of over-the-counter desks, as well as their social networks. As these OTC work as a fiat gateway for Bitcoin trade, it became difficult to exchange Bitcoin for stablecoins.
Is Bitcoin Dying In China After The Actions Of The Chinese Government?
After the attack from the Chinese Government some regions of China reduced their capacity to 25% mining, leading to an 85 million TH/s hash rate, the lowest hash rate Bitcoin has had in two years. The restrictions and mining capacity in China made the miners move their equipment to Kazakhstan, Canada, and the United States, this allowed them to recover the hash rate to 100 million TH/s in less than three weeks. The peer-to-peer transactions also kept moving out, regardless of banning the companies related to crypto transactions, some individuals acted as intermediaries for the currency exchange, according to the data of the exchange´s own ranking system over 10,000 transactions were successfully completed.
In addition, different than was expected, the “Asian-based” exchanges like Binance, OKEx, and Huobi have had a minimal impact against others and remain dominant. Even with some temporary troubles and impacts in the price of Bitcoin, the recovery in both of them seems very optimistic.
Why Is China Trying To Kill Bitcoin?
There are several theories of why China is making these restrictions, one of them is that it is just a law-and-order movement from the government for the 100th anniversary of the Chinese Communist Party. Bitcoin has been a synonym of crime since scammers swindled $5.7 billion from investors while others were arrested, creating an impact on the way the government sees Bitcoin. But the strongest theory is that the attack is not only for Bitcoin, but it also is against all cryptocurrencies, and the reason for this attack is the digital Yuan.
The digital Yuan is a cryptocurrency founded by the Central Bank, it started developing in 2014. Digital Yuan works with the blockchain system, with the difference that usually cryptocurrencies are decentralized, implying that they are not ruled by an administration, government, or bank. Different from other cryptocurrencies, the digital Yuan is ruled by the government and the Central Bank of China. As this digital Yuan works with a blockchain ruled by the government the information in the transaction is secure as with other cryptocurrencies increasing the security for personal information, yet the government keeps some information in order to trace illegal activities such as money laundering or tax evasion. There is also a theory that the digital Yuan may try to gain power by making Latin American countries pay their debts in digital Yuan.
However, some experts declare that Bitcoin is not dropping because of the attacks it is having, it is because it is not necessary, the high risks that investing in this currency takes, and the thought of cryptocurrencies substituting normal currencies based on gold does not seem like something that could happen in a near future. Nevertheless, China is indeed working on getting rid of cryptocurrencies, whatsoever the reason may be, it is important to be cautious with any action the Chinese government could take in the next few years and its repercussions on the price of Bitcoin.
