China Bitcoin ban Archives

27th August 2021

The People’s Bank of China Blasts Bitcoin And Crypto. Once Again.

For a minute there, it seemed like the FUD was over. The People’s Bank of China contributes to its country’s crypto-crackdown at the “Financial Knowledge Popularization Month,” People’s Daily Online reports from Beijing. Speaking at an event, Yin Youping, Deputy Director of the Financial Consumer Rights Protection Bureau of the People’s Bank of China, claimed:

“We remind the people once again that virtual currencies such as Bitcoin are not legal tender and have no actual value support.”

Related Reading | “The Death Of China’s Bitcoin Mining Industry,” 7 Takeaways From The Article

Furthermore, Yin Youping classified all cryptocurrency-related investments as pure speculation. He advised the public to “consciously stay away” from virtual assets to avoid unnecessary risk, and to “protect their “pocket.” Nothing crazy coming from a fiat-fuelled bureaucrat. Nevertheless, an interesting new piece in China’s crypto-puzzle.

Disclaimer: This article used Google-Translated quotes and information. Small inconsistencies are a possibility.
What Else Did The People’s Bank Of China Said?

Besides contributing to China’s crypto-crackdown, Yin Youping responded to the “rebound” in cryptocurrency trading in his country. The People’s Bank of China will:

Work overtime to “detect overseas exchanges and domestic traders.”
Block “trading websites, apps, and corporate channels.”
Intensify “policy publicity,” to let everyone in China know the law of the land.
Establish “a normalized working mechanism” and continue to crack down on cryptocurrency transactions.
Maintain “a high-pressure situation.”

The People’s Bank of China’s aim is pretty clear. And it seems to be working, Youping claimed that “the popularity of virtual currency trading has dropped significantly.” The Deputy Director also encouraged the general public to report “illegal fund-raising crimes” to the relevant authorities.

BTC price chart for 08/27/2021 on Bitstamp | Source: BTC/USD on TradingView.com
Does This Offer Insight Into China’s Crypto Strategy?

In a thread summarizing the case, Chinese journalist Colin Wu gave us inside information that wasn’t part of the article. “By blocking exchanges and strengthening policy publicity, China’s popularity has dropped significantly.”

3. By blocking exchanges and strengthening policy publicity, China's popularity has dropped significantly4. Crack down on illegal fund-raising activities with virtual currency and blockchain.

— Wu Blockchain (@WuBlockchain) August 27, 2021

One of the surprising revelations from Chainalysis’ Global Crypto Adoption report is that P2P trading “declined dramatically” in China. At the time, we naively asked:

Why are Chinese people abandoning P2P trading so radically? Wouldn’t the “government crackdowns on cryptocurrency trading” cause a surge in old P2P trading instead?

This “high-pressure situation” that the People’s Bank of China maintains might be the answer to both questions. As we learned, both “the popularity of virtual currency trading” and “China’s popularity” dropped significantly. China’s cracking down on the general population as much as on their biggest industries. Bloomberg tried to explain their moves by defining the “New China Model” as:

If China is abandoning the Silicon Valley model, what will it replace it with? Insiders suggest it will be less founder-driven and more China-centric.

Related Reading | China Banned Bitcoin Mining. What Happens To Small Hydropower Stations Now?

We finished that article with more questions than answers. From “Why is China dwarfing its biggest industries and players? Is the “China Model” just concerned with scale?” To “Is their crackdown on Big Tech even related to their crackdown on Bitcoin mining?“ And concluded:

There’s only one thing we can know for sure: China’s making big coordinated moves when it comes to tech. And they seem to have a plan.

Maybe their plan is simpler than we thought. It’s possible that The People’s Bank of China is just going to make it really really hard for the common citizen to access Bitcoin. And, China’ll use propaganda and repetition to keep people in check and scared of the unknown. One of Bitcoin’s prototipical adversarial scenarios. A battle that Bitcoin expected sooner or later.

Featured Image by Bruce Röttgers on Unsplash – Charts by TradingView

22nd July 2021

CBECI Report: China’s Hold Over Bitcoin Mining Was Waning Before The Crackdown

Shocker! According to the latest CBECI update, China’s control over Bitcoin mining was already waning. The Cambridge Bitcoin Electricity Consumption Index shows that and much more, it “provides an up-to-date estimate of the Bitcoin network’s daily electricity load.” However, China is the headline. The government’s recent ban on Bitcoin mining left the world speechless, and this feels like another piece to solve that puzzle.

It doesn’t quite fit, though. According to Arcane Research, CBECI numbers say that:

China’s share of total Bitcoin mining power has declined from 75.5% in September 2019 to 46% in April 2021 — before the restrictions on Chinese miners were even imposed. That figure is much lower than the older estimate of 65%.

That’s a sharp decline. Why did China’s miners lose so much ground before the ban? Did the Chinese government turn off the machines that they reportedly own? Why would they do that? Is everyone missing an obvious explanation for all of this? It’s also very interesting that the CBECI shows that the United States and Kazakhstan were growing at a tremendous rate before the ban.

BTCUSD price chart for 07/22/2021 - TradingView

BTC price chart on Bitstamp | Source: BTC/USD on TradingView.com

Bitcoin Mining In The United States And Kazakhstan

Arcane Research crunched the numbers, and apparently:

Over the same period, the United States’ share of total Bitcoin hashrate increased from 4.1% to 16.8%, making it the second-largest Bitcoin mining location.

Following behind is Kazakhstan, with an almost six-fold increase of hashrate share — from a mere 1.4% in September 2019 to 8.2% in April 2021.

That ‘s curious. After the government ban came into effect and the miners turned off their machines, we worried about the Bitcoin hash rate going into a death spiral. The great miner’s migration was on its way, and guess who were the forecasted big winners:

Tons and tons of mining equipment are currently traveling to their new homes. There are reports of a huge operation in Kazhakstan, a neighboring nation of China. There are also rumors of equipment and personnel already settling down in Texas. The US state is making a push to become a Bitcoin mining capital, and apparently, the efforts already bore fruit.

Remember, though, everything the CBECI numbers show happened before the ban.

Is there something we’re missing?

CEBECI, a graph showing Bitcoin hash rate dominance

Country share of global Bitcoin hash rate | Source: Arcane Research

How Do They Get The CBECI Numbers?

The Cambridge Bitcoin Electricity Consumption Index explains the methodology they use:

The underlying techno-economic model is based on a bottom-up approach initially developed by Marc Bevand  in 2017 that uses the profitability threshold of different types of mining equipment as the starting point.

Given that the exact electricity consumption cannot be determined, the CBECI provides a hypothetical range consisting of a hypothetical lower bound  (floor) and a hypothetical  upper bound  (ceiling) estimate. Within the boundaries of this range, a  best-guess  estimate is calculated to provide a more realistic figure that approximates Bitcoin’s real electricity consumption.

So, it’s a very elaborate educated guess. However, it’s based on real data and a range of estimations. Does it tell us anything about the curious results they got? Is the data telling a story that we’re missing?

Last month, we posed a theory about the Chinese government trying to get rid of small hydroelectric plants. The whole situation is perplexing, so, we asked the following questions:

It’s possible that the government is trying to get rid of those plants. That would explain the article’s tone, it seems like it was trying to get investors to stay away from those hydropower stations. In light of this, China’s ban on Bitcoin mining could just be part of an even bigger play. They’re serious and methodically shaking things up over there.

What could be their end-game? Is China just trying to go carbon neutral and repair the original flow of the rivers? Or is there something else at play here?

Everything the CBECI shows seems to relate to the answer to all of these questions. However, there’s at least one piece missing. The mystery persists.

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