Fresh reports of a crackdown on Bitcoin mining by the Chinese government have spread another wave of fear throughout the crypto community, resulting in a plummeting BTC price and hashrate. However, with accurate reporting in China heavily restricted and news largely unverified, we are once again left wondering: what’s really going on?
According to reports, large numbers of crypto mining operations in Sichuan and other Chinese provinces have been shut down over the past few weeks, reducing the Bitcoin hashrate by around one-third.
Many believe this is the reason for the drop in price but that’s not necessarily the case. It’s equally possible that a sell-off prompted by negative news would cause a price drop, and subsequently a hashrate drop. It’s clear to see that hashrate and price are closely correlated but it’s difficult to ascertain exactly which one follows which.
The general consensus seems to be that China has banned or restricted Bitcoin mining in several provinces, including Sichuan, Inner Mongolia, Xinjiang, Qinghai, and Yunnan. Since it has long been understood that a large percentage of Bitcoin mining hashrate originates from China, this would naturally result in a significant drop in hashrate and, subsequently, price. But maybe it’s not all bad?
Increased Distribution and a Return of Private Mining
The developments mean there has been an increase in mining activity from unknown pools, indicating a large number of miners are now working to hide their origins. While popularly known mining pools like Binance, Huobi, and OKEx have seen a clear decrease in hashrate, secret mining has increased. As Bitcoin becomes more mainstream, this return to a more privacy-centric model should be a welcome development for crypto traditionalists. Privacy is a key tenet of cryptocurrency, one specifically designed in response to increasingly intrusive financial surveillance by governments.
Furthermore, Bitcoin critics have long highlighted China’s mining monopoly as a reason why Bitcoin is not truly decentralized. If the crackdown really is driving miners away from China, it should help create greater diversity in the overall miner pools, increasing the security and distribution of the network.
As global attempts to regulate cryptocurrency continue to fail, we are reminded of the true power of a decentralized, immutable financial network that was specifically designed to survive such attacks. With each failed attempt, the crypto community becomes increasingly aware of the truth: that we are all part of a free-market economy that is immune to any government rule.