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Is China’s Bitcoin mining ban the worst decision of this century?
Although the process has been underway for a relatively long time – and even the most outspoken opponents of the cryptocurrency market Have I got involvedeven during the “crypto winter”: 2024 was the institutional year cryptocurrency adoption.
The trend has been more evident and extensive regarding Bitcoin (Bitcoin), especially after the approval of the first American commercial BTC Exchange Traded Funds (ETFs).
In fact, these financial instruments have attracted considerable institutional interest in recent months investors of all stripes joining the action.
One country that has excluded itself from both this trend and its fruits – and which, arguably, has made it difficult to catch up – is China.
In 2021, the government of the People’s Republic prohibited BTC mining within its borders, which, while it has failed to completely eliminate such activity, has significantly damaged the once-booming industry.
The ban quickly gutted China’s Bitcoin mining sector, which, after already declining global market share between 2019 and 2021, fell to 0% at one point in 2021, according to data made available through the Cambridge Bitcoin Electricity Consumption Index (CBECI).
Although the figure has increased slightly with activity in China – mostly considered to consist of clandestine operations – which stands at around 21%, it still marks a substantial decline compared to the definitive mining market before the ban share of 46%.
China is unlikely to be able to catch up
Finally, even if the Chinese government assessed in 2024 that its decision was a mistake given Bitcoin’s recent mainstream legitimation, it would likely have difficulty attempting to regain ground.
One of the main reasons behind these probable problems is the last halving of BTC which occurred in April 2024. The event made it twice as difficult to obtain the coin, with JPMorgan (NYSE: JPM) recently reviewing the estimated cost to mine a single Bitcoin at $45,000.
Concerns related to increased mining difficulties are perhaps most evident in the stock prices of major BTC miners – such as Marathon Digital (NASDAQ: MARA) and Riot Platforms (NASDAQ: RIOT) – which have fallen since the start of the year Despite the cryptocurrency market is undergoing a broad and broad rally.
However, with Bitcoin hitting new all-time highs (ATH) overall in March and, when denominated in yuan, in Februaryand with other important parameters such as hashrate being at their highest, it is possible that China will seek to reverse the ban.
Why China may not consider the ban a mistake
Ultimately, while it is possible that recent trends could force the Chinese government to reevaluate its ban, this is far from guaranteed, given that some of the key stated reasons behind the decision are largely still relevant.
Although Bitcoin has been trade with relatively little volatility in recent years – at least by cryptocurrency market standards – it is doubtful whether stability has yet proven sufficient to negate the original argument to preserve financial stability.
In fact, China has expressed its concerns that Bitcoin it could collapse to $0 no later than 2022, shortly after the cryptocurrency winter began in May of that year.
Likewise, while China has worked to increase its reliance on green energy, the share of supply has increased only about 2%. from 27.73% in 2021 to 29.14% in 2023, meaning it is doubtful much has changed regarding the environmental topic.
Finally, the last major reason for the ban, concerns about capital flight, has likely only increased given the global economy’s greater exposure to cryptocurrency markets and higher rates of cryptocurrency adoption.
On the other hand, there have been some developments in China that suggest a moderately accommodative attitude towards cryptocurrencies, such as a conference in Nanjing that took place in late April and was attended by numerous scholars Agree on the need to give digital assets a more concrete legal status in the country.
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