We have reached this date of the year: in which the Chinese government once again prohibits the use of bitcoin and cryptocurrencies in its territory. I haven’t been through Twitter yet, but I can see it coming, hundreds of tweets from hysterical – or happy – users proclaiming the death of bitcoin. “This time yes, deveritas, who died quite dead”, they will surely be singing. However, those who have been in the cryptocurrency market long enough will surely feel the protagonists of the movie “Groundhog Day.”
Trapped in an eternal time loop, we relive what That already happened months and even years ago. No, it is not the first time that China criminalizes the use of cryptocurrencies in their country. The truth, if they fail a In short memory, in mid-2021 bitcoin mining also began to be prohibited, which generated a massive exodus of miners who had decided to concentrate in these latitudes for years.
By then, it was also believed to be the end of Bitcoin. With a drastic drop in the network’s hash rate due to the abrupt disconnection of Chinese miners, coupled with an alarming crash in market prices, the situation looked pretty bleak. Despite the widespread panic, Bitcoin survived. Yes, gentlemen, it was not the end of the world. China did not destroy the cryptocurrency market, because in fact it has never had control over it.
If Bitcoin could survive one of the exoduses largest miners in its history, then a ban on paper and ink is not going to cause major problems. Do you know why? It is very simple, with each regulation that the Chinese authorities have imposed on the cryptocurrency market, the rulers were losing more and more influence over the fate of Bitcoin. To be honest, I think we should be grateful for the radical policies that the Chinese government has taken towards the cryptocurrency market.
Perhaps, if they had been more sibylline and cunning, they would have tried to manipulate the market from its foundations. They could have achieved it, since the main companies that make up this market had in their territory. However, creating a frontal battle against all forms of business related to cryptographic assets, the government of China and its Central Bank managed to get the situation out of their hands.
How did China lose its influence on Bitcoin?
Those who have been in the Bitcoin ecosystem since before 2017, will remember that on that date the offensive of the Asian country began against the cryptographic asset businesses that existed in the region. Although it is worth noting that, from as early as 2014, the Chinese government made its first forays by prohibiting the sale of bitcoins.
At that time, China concentrated several of the most important exchanges in the world. market, more than 60% of the Bitcoin hash rate came from farms located in this country and the ASIC manufacturing keys were also national. Simply put, the Asian powerhouse was a core of great importance to the functioning and economy of Bitcoin.
Let’s put in context for those who did not yet know the bitcoin industry of 2017. Taking their first steps to a higher level « mainstream «, Bitcoin was beginning to be adopted by countries such as Japan and South Korea, being one of its objectives attracting and pleasing Chinese tourists – those who used the most cryptocurrencies at that time. Likewise, Ethereum’s first entrepreneurial steps were also taking place in the lands of China, where interest in the financial possibilities offered by blockchain networks was growing.
However, the honeymoon it lasted very little. The first big blow was to the exchanges, who began to be monitored by the Central Bank (PBoC) and many had to close. Initial Coin Offerings (ICOs), which were very popular at the time, were also rejected by government authorities. In this way, began to crack the first steps to consolidate a cryptocurrency nerve center in China.
From 2017 onwards, they have been There are many laws and measures that the Chinese government has taken to curb the growth of the domestic cryptocurrency market. When the exchanges could no longer work within China and moved to other latitudes to continue providing their services to the citizens of this nation, the authorities decided to ban their web pages. Not complying with this, meetings related to crypto assets were also prohibited, as well as for banks to accept transactions related to these markets and even for companies to provide services over these networks.
All the times the Chinese government made a decision against the growth of the cryptocurrency ecosystem on its borders , said measure had an impact on the price of BTC and generated panic among cryptocurrency users. However, with every step the government took, a subtle reaction was being generated in the market that would change the rules of the game. Running out of exchanges to regulate, companies to monitor, and crypto capital flowing to other countries, the Chinese market’s influence on Bitcoin greatly diminished.
How can you affect something that is not within your reach? How can you control something that is not even in your zone of influence? By banishing Bitcoin from its lands, the Chinese government stopped being a heavyweight in the crypto industry and began to lose relevance. The last big blow was to the mining industry, which was still concentrated in this nation, until in July 2021 its operations began to be prohibited in various provinces of China.
The decision taken by the government forced the miners to distribute themselves around the world, in search of better options and greater legal stability. In this way, they lost the last bastion that they could really influence. That is, today’s measures are just the ashes of the industry they destroyed.
We must be grateful
What I mean by all this is that: It has been more of a positive impact for Bitcoin that China decided to ban its use. For some it may seem paradoxical, because those who use cryptocurrencies want there to be more and more adoption worldwide, and undoubtedly that a country of the magnitude of China decides not to have anything to do with Bitcoin is a hard blow. However, we have to be realistic. China was not going to become our El Salvador overnight.
China already has plans to create a state-controlled cryptocurrency. In other words, it is not interested in its citizens having access to another financial asset that allows them to escape government control and strengthen their rights to privacy. Undoubtedly, internal government policies will affect the Chinese market, just as they have done all these years.
Even so, this does not weaken Bitcoin today, because this industry has already been been decoupling from the Chinese market. For example, a year ago more than 60% of the Bitcoin hash rate was concentrated in China, which generated concern among cryptocurrency users, since it violated the decentralization of the network.
While the exodus of miners occurred in the middle of this year, reports from the HashRate Index indicated that it was possible that 40% of China’s hash rate was relocated to the United States. A thesis that seems to have been fulfilled with the increase in mining farms in this American country and Canada, along with millionaire purchases by ASIC miners.
The decrease is due to the fact that, motivated by government bans, thousands of miners migrated to countries such as the United States, Russia , Iran, Kazakhstan and Canada. In other words, in the end a measure that could be to generate problems in the operation of bitcoin, ended up being a solution to a problem that could generate future headaches.
Similarly, it must be taken into account that Bitcoin already has sworn enemies, as is the case of the president of Turkey. Not all countries are going to accept it, and the trend seems to indicate that especially the great powers do not want to have anything to do with Bitcoin or (at least) they want to make it the most difficult path. While the United States seeks to collect more and more taxes from cryptocurrency companies and China decides not to want to engage with this market, other nations find the cryptocurrency very useful.
With El Salvador spearheading the adoption of bitcoin By converting it into legal tender, countries such as Ukraine, Laos, and Cuba are taking their first steps towards making cryptocurrency a legal payment method. Likewise, nations such as Argentina, Venezuela and even Zimbabwe have shown that assets such as bitcoin can be very useful to create parallel economies that allow their citizens to overcome eventualities.
Finally, if what you The concern is the price of Bitcoin, which plummeted due to the last measure, I have a piece of information for you. It is not the first time that the bitcoin market has reacted with panic to the constant bans of China, the truth has always happened and there are other times that the fall has been worse.
So no, I do not think it is the end of the world, bitcoin will not go to 0 either. We are simply facing a situation that proves that every time people pay less attention to the government of China in relation to cryptocurrencies. And it is that, in the end, it is not necessary to give it great importance because the country has lost its influence of yesteryear. In this war, China is not winning.
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