Two Months after China Banned Bitcoin Mining, How Has Bitcoin Managed?
In late May, the Chinese State Council announced a crackdown on Bitcoin mining throughout the country. The government has been true to its word and moved from region to region getting rid of Bitcoin miners. A lot of the Bitcoin mining shut down completely, while many of the miners moved to other countries where the process of producing Bitcoin is not frowned upon so much.
There’s still some Bitcoin mining happening within China’s borders, but the government has managed to eliminate over 90% of active mining in the country. That’s significant for the Bitcoin market and the cryptocurrency industry at large, especially since China accounts for about 75% of all Bitcoin mining that takes place. Or, at least it did before the ban came into effect.
The immediate effect of this ban was that Bitcoin mining dropped off considerably and the price of Bitcoin plummeted about 30%. Let’s look at the wider Bitcoin pricing history for this year and what effect the mining ban in particular has had on the price.
One Hit After Another
Bitcoin was doing extremely well this year, along with the wider cryptocurrency market. The historic success of Bitcoin since 2020 was pulling the rest of the cryptocurrency market along with it. There was increased interest from the mainstream media and new investors in cryptocurrency of all kinds.
In October of 2020, the Bitcoin price started to see a sharp increase, with the BTC/USD pairing hitting $13,000 for the first time since 2017. The price continued to rise until March of 2021, where BTC/USD hit a historic all-time high of $59.918. By May 1st, the price had plummeted to $37,332.
What changed with Bitcoin at that point? The drastic market shift comes down to Elon Musk, primarily. The influential inventor and businessman announced his company would not accept Bitcoin, and the market reacted with a major Bitcoin price drop. The price dropped again when Musk announced his company would not do business with Bitcoin until its environmental impact was reduced.
Then came the Chinese mining ban, impacting the Bitcoin price again. The digital asset was already on a downward spiral, and this news only hurt it more.
The Bitcoin Market Now
We’re now two months out from the beginning of the Chinese Bitcoin mining ban. The Chinese government is still finding Bitcoin miners throughout country and shutting them down or chasing them out of the country. This has seriously affected the amount of Bitcoin being produced.
Up until the ban, Bitcoin production was moving along at a steady incline, but now it has started to level off. There was a huge impact on Bitcoin production following the ban, but it’s a problem that is managed to self-correct. The clever algorithm used to determine how much processing power is required to produce Bitcoin has automatically changed in the wake of the mining ban. This didn’t happen overnight, so the market was impacted, but it is now easier to make Bitcoin than it was previously.
Immediately following the mining ban, we saw a sharp drop in Bitcoin price. On May 11th, the BTC/USD rate was at $56,704, and it fell to $37,002 by May 19th. It’s down to $31,708 now, which is part of a continued decline, but not a sharp one at this point.
The price has continued to drop, but the rate at which it drops has slowed considerably, showing some measure of market stability. This could mean that Bitcoin is preparing to break out in the near future, but it’s difficult to say when that might happen. We do know that Bitcoin is prepared for the next impactful event, as its decline and volatility have both slowed.
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