What happens to bitcoin after China’s squeeze

What happens to bitcoin after China’s squeeze
by Marco Dell’Aguzzo

Bitcoins have lost almost 10% of their value. The decline was attributed to China’s tightening on mining. Beijing’s central bank is calling Chinese financial institutions to order

Today bitcoin, the main cryptocurrency in the world, has lost almost 10 percent of its value, reaching $ 32,094 each: it is the minimum in twelve days. If we look at the last six days, we see that bitcoins have fallen by more than 20 percent and have practically halved compared to the peak reached in April (almost 65,000 dollars for one bitcoin).
Since the beginning of the year, however, they have gained more than 10 percent.
WHAT CHINA IS HAPPENING WITH THE DECREASE OF BITCOINS
Bitcoin is extremely volatile, i.e. subject to strong price fluctuations. The decline in recent days has been traced back to the tightened taxation in China on the so-called mining (“extraction”), which is the procedure that allows you to manage the network of transactions and generate cryptocurrency: it is an activity that requires high-powered computers of calculation, which consume large amounts of energy.
On Friday, the Chinese authorities of the Sichuan province, in the south-western part of the country, ordered the closure of bitcoin mining projects. Earlier, in May the State Council (the central government, in Beijing) announced that it wanted to put a stop to cryptocurrency mining and trading to keep financial stability under control, Reuters explains.
HOW MUCH IS CHINA WORTH IN BITCOIN “MINING”
In April last year, China accounted for 65 percent of total global bitcoin production, according to data compiled by the University of Cambridge. Much of this production is concentrated in Sichuan: it is a favorite destination for mining companies to set up activities there, given the possibility of accessing abundant hydroelectric energy with which to power the data centers.
Another Chinese mining hub is the Inner Mongolia region, where electricity for computers is, however, mainly generated from coal.
CRYPTOCURRENCY SALE
Also Reuters explains that the decline in the value of bitcoins could be linked to the sale of large quantities of cryptocurrency by “miners” (who usually have large stocks), given the restrictions on their activities in China.
Antoni Trenchev, co-founder of Nexo, a company in the cryptocurrency sector, told Bloomberg that the Chinese decisions will cause “some volatility in the short term, but should not have medium and long term effects for bitcoin”.
THE REQUEST OF THE CHINESE CENTRAL BANK
Today the Central Bank of China summoned representatives of major national financial institutions – such as the Commercial Bank of China, the Agricultural Bank of China and Alipay, the financial services platform linked to Alibaba – to remind them of the ban on participating in bitcoin transactions. .
The central bank stated that operations with cryptocurrencies create disruptions in the financial order and “fuel the risk of criminal activities such as illegal cross-border transfer of assets and money laundering”.
HOW OTHER CRYPTOCURRENCIES DO
In addition to bitcoin, ether (another less important cryptocurrency) also lost almost 12 percent of its value, dropping below $ 2,000 for the first time in about a month.
Bloomberg writes, reporting on CoinGecko’s measurements, that the combined market value of all cryptocurrencies now stands at $ 1.45 trillion, up from $ 2.6 last month.
June 21, 2021
by Marco Dell’Aguzzo
Journalist, he deals with foreign affairs, energy and geopolitics, with particular attention to Mexico and Canada.