Bitcoin Bulls - Silver Lining in China Mining Ban
A couple of days ago some rumours surfaced that suggested that China intends to ban cryptocurrency mining. Although I would not be completely surprised if Chinese government goes ahead and imposes the rumoured ban (after all they have a track record of banning exchanges and ICO’s) there is no credible source yet to confirm it.
This rumour may or may not be the cause of the return of the bearish trend we are currently seeing but if it is, then I am completely baffled.
If China does ban cryptocurrency mining, that just means someone else will take over the coveted title. After all it is an opportunity for new or existing players to grow their stake.
It does not make any sense to me as to why and how this mining ban can be such a bad news? China currently has two thirds of the global bitcoin mining capacity. That’s a lot of bitcoins being mined in one country. And if you think about it, it is better to not have two thirds of all global mining capacity concentrated in one country that thrives on controlling every aspect of its citizens lives. Although it is not a great news if you are a miner in China, it really does not sound like the end of the world to me.
If the rumoured ban were to be true then in the short term at least, the supply of bitcoin will go down and that to me does not sound like a bad thing. If we revisit our high school economics books, the basic principles would suggest that if China goes ahead with the mining ban, it will significantly limit the supply of Bitcoin which in turn will increase Bitcoin prices.
So if Bitcoin supply is threatened to go down in the near future then one would assume that Bitcoin price will go up! However that is not what we are seeing here. So what in the world is going on?
What is behind the resurrection of this bearish trend? Is there something I am missing?
Hi Lucy
Just to clarify ... the quantity of Bitcoin will not go down. It might slow transaction times but mining is like a horse race. If you own several horses and they all compete in the same race, it is likely that you will win. If you take your horses out of the race, the race will still continue ... just slower horses will win. I used to own a miner when BTC rose from $100 to $1000. If transaction times become slow, it is easier to exchange the BTC to LTC and transmit those. When people do so, the difficulty reduces (allowing the slower horses to be able to compete).
This chart shows that we had a difficulty drop starting in November.
Oh I see. I thought if 70% of mining farms are interrupted (stopped mining due to the ban) it would impact the supply of new Bitcoins in the market (lesser bitcoins being mined everyday). I trust your opinion on the matter. Thank you :)
Bitcoin uses the SHA-256 hashing algorithm with an average transaction confirmation time of 10 minutes. If fewer miners are on the system, the difficulty to calculate the algorithms adjust automatically. As long as one miner is on the system, the network will continue.
That's brilliant!
You do make a solid point ! These news should actually be considered bullish if you look at it from a supply and demand perspective
So good to hear from you :)
This red market is giving me a heartburn :D I think its time for bulls to get back in the game.
I just saw a post talking about how they didn't update Korean exchanges... its' above your post... Not sure yet if it's true though..still talking to him
Oh that's interesting. I think it started over the weekend. I will do further investigation and see if there is a correlation between the two. Thank you :)
Yeah, happily. Lemme know what you find out ;D
It hard for the banking systems to take place when it comes to cryptocurrencies, since it bypasses the banking system and the goverment losses control over its economy. Same thing happend in Ukraine and Russia some months ago. They try to hunt down miner but they dont make it illegal to use bitcoins yet, since theyll be left out and lose a lot of money. I other countries you can even rent a room in a hotel using cryptocurrencies like dogecoin
I agree with you. I think they are afraid of losing control. They have a lot to lose so I certainly hope they'll not rush into anything stupid. I think China has a tendency to ban first think later :)
I think the only issue is the electricity in China is really really cheap which makes mining Bitcoin profitable. Countries where the cost of electricity is higher will not get as good a reward as China do so the uptake might not be as much.
You are right though, it is better to not have to much power in one place.
That's true! They have had a big advantage over other parts of the world where electricity is significantly more expensive. I hope we can find cleaner energy which is cheaper and better for environment.
Thank you for stopping by. Truly appreciate it :)