The ups and downs of virtual currency took off to extraordinary proportions last weekend. Faced with this situation, China now wants to fight against Bitcoin. While it has just started the crackdown on mining, the country is now declaring Bitcoin mining undesirable.
The government of China bans Bitcoin mining.
Xi Jinping’s government “will crack down on bitcoin mining and trading.” “It will resolutely prevent the transfer of individual risks to society.” This press release was made public by the Committee for Financial Stability and Development under the Chinese State Council. In other countries, this body would be a kind of cabinet of the country. This committee is under the aegis of Liu He, current Deputy Prime Minister and principal agent of President Xi Jinping in matters of economy and finance.
Also, Li Yi, the chief researcher who works at the Academy of Social Sciences of Shanghai, has just announced in the South China Morning Post:
The wording of the declaration did not leave much room for maneuver. When all mining activities are banned in China, cryptocurrency mining will be a turning point for the future of bitcoin since a significant part of its processing power will be removed from the table.
Undoubtedly many of you who read us do not know the Chinese exchange Huobi. This market for the sale of cryptocurrencies is nevertheless one of the most important in the world. It also manages the eighth largest bitcoin miners pool in the world: 4% of the total hash rate (something like the production of bitcoins) comes from that group of miners.
However, things are changing for Huobi, which after the latest decisions of the Chinese government, is changing its strategy and seems to reveal an important trend for this segment: miners are considering moving to other countries, and that seems to be one of the reasons for the new falls that both bitcoin and other cryptocurrencies are suffering.
China tightens but (for now) does not drown at all
We have already commented on other occasions how the situation in China has two very different faces.
That was one of the great reasons for the recent collapse of cryptocurrencies, which this past weekend have plummeted again. That apparent persecution of miners operating in China also seems to have had something to do with this new decline.
The Chinese Central Bank has asked other banks not to accept any bitcoin payments. The day before, China cut off power to companies that mine bitcoin. Meanwhile, bitcoin first hit the critical $ 30,000 mark.
BITCOIN CONTINUES TO OSCILLATE
Bitcoin has been undergoing big shocks on the stock market for a few months: after having increased vary enormously at the end of 2020, it has tended to fall again since May 2021, because of signals sent by Elon Musk, obsessed with cryptocurrencies, or Beijing, which, on the other hand, is doing everything to prevent bitcoin from gaining momentum. After these latest announcements from China, the virtual currency took another hit, falling nearly 10% in 24 hours on Monday, June 21.
Industry experts believed the currency could tumble if it fell below this mark, much faster than in recent weeks. And this until it returns, hypothetically, to its low value of 6,000 / 7,000 dollars that it dragged out between 2018 and 2021.
To be sure, virtual currencies are not, by definition, tangible assets – buying bitcoin is not the same as buying shares in a business that creates value (goods or services). The price of cryptocurrencies tends to experience closely spaced highs and lows, as these currencies are the subject of a lot of speculation, both by individuals and businesses. The signals sent by China and the awareness of the dire environmental impact of bitcoin mining are not helping to stabilize them.
On the technical side, states have little to blame for crypto-currencies. They cannot accept losing control over money, be it digital, electronic, paper, or even metal.
China wants to impose its digital currency.
China’s current posture is an illustration of this. With the ambition to become the world’s leading power in the short term, the Middle Empire and its leaders know very well that it is necessary to master the reference currency to establish their influence. They saw how the dollar took the place of gold with the end of the gold standard with several decades of United States hegemony to the key. To succeed in their plan, China intends to replace the Dollar with the Yuan! To go faster, the Chinese leaders decided to create an e-Yuan, a cryptocurrency, of course. Still, with fully centralized control, so it is the exact opposite of the governance of Bitcoin. To attribute millions of e-Yuan to a state or a population in a few milliseconds is one thing conversely, removing billions from a line of code to punish or slow down a partner (called “burn” in the crypto world, the power to destroy money), is to regain absolute control over money.
Is the competition from Bitcoin and other cryptos too intense?
Therefore, the Chinese authorities have asked banks and payment companies to reject all activities linked to crypto-currencies, recalling the risk of volatility of these assets, which are “not currencies.” This damages people’s property and disrupts the world economic order.” A few days later, China outright banned mining, that is, the creation of Bitcoin, when it was a flourishing industry. Some even feared that the Chinese could one day take power over Bitcoin with their computing capacities by controlling 51% of the network. This will never be the case.