Will China’s attempts to reset Blockchain technologies cause Bitcoin price plunge?
Warnings of a dramatic BitCoin price drop abound this morning as stories suggesting the Chinese Government is seeking to reset blockchain technologies cast severe doubts over the future of mining in the country.
If true, the move could see electricity cut to BitCoin miners in China, providing physical roadblocks to their operation and shutting down one of the biggest mining communities in the world. Local governmental organisations are being instructed to jump out of the crypto mining industry by a multi-agency task force.
As Jehan Chu, a prominent and early investor in crypto currencies, explained to Bloomberg News, the Chinese Government is “taking control of what they believe a truly transformational technology.
This aren’t the first actions taken by regulators in China to slow down the progress – or exert greater control on – crypto currencies following the shutdown of local bitcoin exchanges and its ban on ICOs.
“This is really kind of the final strike of the Chinese Government’s desire to reset the entire story of blockchain. I think what they want to do is clear their decks – they’ve done it with exchanges, ICOs and now they’re doing it with mining,” Chu explained, adding that cryptocurrency doesn’t have an “inherent value” despite its popularity and potential to become the most-talked about financial trend of the decade. “Blockchain technology is about software that is being built,” he said. “Cryptocurrency trading is just what we see on the surface.”
According to a document referred to by the Financial Times, Bitcoin mining in China “consumes a large amount of electricity and also promotes a culture of conjecture in ‘virtual currencies’” and “deviate[s] from the needs of the real economy”.
The miners aren’t giving up though. In a bid to continue with their operations, some outfits are seeking to move their operations overseas to countries with cooler climates, with Canada, Iceland, eastern Europe and Russia all earmarked as potential destinations for mining rigs. In addition to less stringent regulation, the lower temperatures exert less pressure on their mining rigs meaning lower running costs.
The price of bitcoin has been steadily falling for four days straight now from its record peak of $20,000 on December 17 to its current trading price of $14,000 (a 30% drop). But it’s not all bad news, with some arguing the latest move by China to block mining operations will have a positive effect on decentralising mining operations.