What's next after China's Ban on Cryptomining?

What's next after China's Ban on Cryptomining?

What's next after China's Ban on Cryptomining?

In May 2021 we witnessed a massive price dump in #BTC, #ETH and almost all Altcoins. This dump has mostly attributed due to 3 reasons:

  • Tesla’s removal of support to BTC as payment.
  • Elon Musk’s negative tweets
  • China’s Renewed Crackdown on Cryptocurrency Mining

Out of all 3 reasons, China’s Crackdown on Crypto Mining in May can be considered as the biggest contributor to the damage: In fact, China's renewed crackdown on the cryptocurrency industry has wiped around $400 billion in value off of the total digital currency market.


Additionally setting off what’s being dubbed in crypto circles as “the great mining migration.”

“the great mining migration.”

And the Crackdown on Mining & trading in China continues

To demonstrate their resolve to meet Beijing’s climate targets China in June 2021 brought the most aggressive sovereign assault on #Bitcoin ever. A massive concerted effort from China.

Here is a picture showing 25 discrete events in 30 days.

China in June 2021 brought the most aggressive sovereign assault on #Bitcoin ever. A massive concerted effort from China. Here is a picture showing 25 discrete events in 30 days.

What does this mean?

As per the estimates of the global distribution of mining power, about 65% to 75% of the world’s bitcoin mining happened in China – mostly in four Chinese provinces: Xinjiang, Inner Mongolia, Sichuan and Yunnan. Where mining activities in Sichuan and Yunnan were based on renewable energy, while Xinjiang and Inner Mongolia relied upon China’s coal plants.


The drop in hashrate shows that the installations are being turned off throughout the country and 50% to 60% of Bitcoin hashrate will ultimately leave China. 


The drop in hashrate shows that the installations are being turned off throughout the country and 50% to 60% of Bitcoin hashrate will ultimately leave China. 

The immediate effect was the flooding of cheap 2nd hand #Miners as chinese miners started liquidating their mining investments. Which caused flooding of cheap 2nd hand miners in the market and ultimately resulted in a sharp price fall. Bitmain, a manufacturing Giant in the Crypto Mining industry are currently forced to announce their move to cease selling new #Bitcoin mining rigs due to the flooding of cheap 2nd hand #Miners.

Mining operators are now cutting their losses and exiting China. 

“We do not want to face every single year, some sort of new ban coming in China,” said De La Torre, vice president of Hong Kong-headquartered mining pool POOLIN.So we’re trying to diversify our global mining hashrate, and that’s why we are moving to the United States and Canada.


Chinese miners are decamping to countries in which they are less unwelcome. Some early favourites among destinations for miners looking to relocate their operations are Kazakhstan, North America and Northern Europe.

Out of these countries, Kazakhstan has become a top destination for Chinese bitcoin miners in search of a new home. Mainly due to Kazakhstan’s proximity to China, its energy surplus, and its openness to mining. 


Here an episode from SesterceTalk exploring why Kazakhstan is a top destination for crypto mining.  

An Uphill Exodus

However, moving to new countries is not as simple as expected. Normally this could be considered as a great expansion opportunity, but the capacity to absorb a sudden flood of former Chinese rigs at these new destinations is very little as of now.

The Capacity to expand is low since firms outside of China have been pursuing expansion plans for months. That means building out power, cooling and space to fit a pre-planned number of machines, so many won’t have the capacity to integrate a sudden flood of former Chinese rigs.

We don’t have any excess capacity until some time next year,” says Bitfarm’s Morphy. “And some of these Chinese miners are willing to talk to us even if their miners aren’t plugged in for another nine months.”

Those operators who are planning to set up an entirely new mining operation will have to face their share of obstacles too. Ever since the coronavirus pandemic, the shortage of electrical transformers has further grown. Transformers are a necessary component for large scale mining to convert energy from a substation before it can be used by mining rigs.

Building an Infrastructure for large scale mining can take anywhere from 6 months to 9 months which means that current bottlenecks will not be resolved until 2022.

What does the Future #HODL for mining?

China's ban might have painted a bleak picture for Bitcoin’s & other coin’s future. What if China, or other countries, further the crackdown on crypto mining activities? Or, what if China completely bans crypto mining? 

However, experts are of the view that even the harshest of the Chinese crackdown on crypto mining may have a positive impact on Bitcoin in the long run.

China’s Bitcoin Mining Crackdown Is a Boon for Miners Elsewhere

The reduced competition for Bitcoin block rewards from Chinese miners has dramatically improved the profitability outlook for mining operations elsewhere. The revenue of all the remaining miners has seen a significant rise from their existing rigs without any need for additional investments.

NEW ADOPTIONS

New Mining operators and Expansion

Since the mining rigs have seen a price correction of up to 50% and 2nd hand rigs are available dirt cheap. Many new people are diving into the mining industry while the existing mining operators are aggressively expanding their mining capacity.


Proactive adoption by other countries and institutions

Despite all bans, We have witnessed some of the most historic adoptions drives ever of Bitcoin by Countries & Institutions

Led by President Nayib Bukele Salvadoran congress has passed the #BitcoinLaw in El Salvador dubbing Bitcoin as a legal tender in the country.

These adoptions have further strengthened the future of BTC.

MicroStrategy has purchased an additional 13,005 bitcoins for ~$489 million in cash at an average price of ~$37,617 per bitcoin


Lesson Learnt: Energy Innovations for sustainable future

Ban and Critics against Bitcoin is nothing new Bitcoin’s surviving through all of this and getting further adopted has further strengthened its position.


The Ban on Bitcoin Mining and its market crash was largely blamed upon the network's incredibly high consumption of energy. The Miners community have learnt from it & have initiated to gradually move towards renewable and sustainable energy sources.

Hence Optimizing the Energy consumption 

here is a video of Enerhash exploring how energy consumption while mining can be optimized in an episode of Sesterce talk.


Due to the demand sustainable & efficient energy sources more aggressive search is happening in the energy industry. Using Geothermal for energy sources is nothing new but now we are going to have geothermal for mining.


In Conclusion: Positive future and rare investment opportunities

China’s ban might have put a momentary pause on Bitcoin’s Bull run towards $100K. However, it will bear a long term positive effect and result in the Crypto industry being more mature with a sustainable growth path.  

If you have not yet invested in Bitcoin or mining, the China Ban has resulted in Rare opportunities for you to start now. BTC is now available for half the price of its Peak of $65000. Also, the prices of Miners are very cheap and attractive


A good time to start mining.