On Friday (21), the Financial Committee of China spoke in a note published on the Chinese government's official website about cracking down on bitcoin mining. Despite the country already having old restrictions on the cryptocurrency market, mining has never been the target of government attacks. The State Council discussed, among other issues, the flexibility and reasonableness of the country's monetary policies. And in that sense, among the measures to “firmly control financial risks”, they cited the crackdown on bitcoin mining and “commercial behavior”. According to local cryptocurrency journalist Wu Blockchain, it was the first time that the government Chinese clearly proposed to attack the mining industry. “The impact of this incident is still uncertain, but it is possible that all public mining activities in China are banned, and exchanges can face severe blows.”, wrote him on Twitter.
Most bitcoin mining comes from China
According to an estimate by the University of Cambridge, about 65% of the computing power of the Bitcoin network is concentrated in China. Therefore, it is to be expected that a risk of banning activity in the country will shake the bitcoin market.
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The price of bitcoin fell by about 8% in just an hour after the note. However, not everyone received the news with the same pessimism. After all, the long-term result can be beneficial for bitcoin. Nic Carter, from Coin Metrics, commented on Twitter:
“People who care about Bitcoin and the planet want China to ban Bitcoin mining. It eliminates a (external) risk factor, decarbonises mining, decentralizes the hash rate and offers greater margins for cleaner miners in the States United."
It is also worth noting that for Bitcoin, as a software, there would be no changes. The network is programmed to adjust its mining difficulty every 2016 blocks (about 2 weeks) precisely so that Bitcoin does not undergo drastic changes in speed, regardless of the number of miners.
Imagine selling an asset because an authoritarian regime doesn't like it.— Jameson Lopp (@lopp) May 21, 2022
"Imagine selling an asset because an authoritarian regime doesn't like it," commented software engineer and former Bitcoin developer, Jameson Lopp.