Jiang Zhuoer, the operator of major Chinese mining pool Lebit Mining, argued that the latest crackdown on crypto in the country would likely lead to miners relocating their activity to Europe and the U.S., as pointed out by journalist Colin Wu.
“The worst case may be that large-scale mines are closed, and China’s Bitcoin mining [will return] back to the state of 2014-2015. Small miners put a few at home. Middle miners find a house to put dozens of machines for mining, large miners find a remote, small hydropower station,” said Jiang.
A Chinese who operating some mine overseas told me that most Chinese miners thought that the construction of overseas mines was too expensive, almost 10x the price in China, but after last night, he received a lot of inquiries.
— Wu Blockchain (@WuBlockchain) May 22, 2021
He also noted that previously, constructing mining farms overseas was considered too expensive for local miners—as costs could be ten times higher than in China—but many of them have changed their minds after this week’s statements from the government.
As CryptoSlate reported, Chinese authorities have published several “anti-crypto” announcements earlier this week, leading to at least two major dips on the market on May 19 and 21.
First, three industry bodies under China’s central bank called for a ban on financial institutions and online payments channels that involve cryptocurrency. Then, the government cracked down on Bitcoin mining as well.
Mitigating social risks
According to Jiang, one of the main aims of the new policies is to protect retail investors from risks associated with crypto trading and mining.
“That is to say, individual mining is allowed, and you can bear profits and losses yourself, but financial capital is not allowed to intervene in mining, which will cause social risks due to losses,” Jiang explained.
In other words, China’s government wants to protect the general public from any losses that could result from investing in cryptocurrencies and mining. And while this is not a blanket ban on the industry—at least for now—it can still result in the relocation of a significant portion of Bitcoin mining capacity to other countries.
“Mining in China may change from large to family miners, even if it causes 50% of the mining machines to fail to operate, there is no problem for the Bitcoin system. But the top mining pools may become European and American mining pools,” Jiang concluded.
A crackdown on miners in China would radically reduce the carbon footprint of Bitcoin mining, increase the profitability of all the remaining #Bitcoin miners, reduce nagging China FUD, support progress toward our ESG goals, & drive up the value of $BTC. We should be so lucky… https://t.co/78ELDF9sku
— Michael Saylor (@michael_saylor) May 21, 2021
In his turn, MicroStrategy CEO Michael Saylor, who invested several billions of dollars in Bitcoin over the past few months, argued that China’s crackdown is actually very good for Bitcoin.
“A crackdown on miners in China would radically reduce the carbon footprint of Bitcoin mining, increase the profitability of all the remaining Bitcoin miners, reduce nagging China FUD, support progress toward our ESG goals, & drive up the value of BTC. We should be so lucky…” he argued.
But judging by the abundance of giant red “candles” on crypto price charts today, the market seems to disagree with Saylor today.
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