In a recent interview, Galaxy Digital CEO Mike Novogratz said that Bitcoin has shown resilience in the face of FUD from China. In an attempt to spin the narrative, Novogratz said that the events of the past few weeks have been “an amazing test.” After defending Bitcoin at $29k so far, he might even be right.
Nevertheless, the Chinese crackdown, especially the mining ban, has sent shockwaves throughout the rest of the crypto world. This has not only led to sales pressure, but as a direct consequence also to a falling hash rate and longer block confirmation times. But Novogratz claims that the short-term pain in the future will yield “a large net positive”.
China takes tough action against mining
China’s relationship with Bitcoin has long been a controversy. Some speculate that the recent wave of FUD has been driven by the Chinese Communist Party, which is trying to crush competition as it prepares for a national rollout of the digital yuan.
Under the guise of financial reform, the Committee for Financial Stability and Development of the Chinese State Council said that they are introducing new controls to reduce monetary risk. The notice, dated May 21, 2021, specifically mentioned a crackdown on Bitcoin mining and the harsh punishment of those involved in illegal financial activities.
Since then, mining operations in Inner Mongolia and Sichuan have been suspended. Several regions, including the United States, Kazakhstan, El Salvador and Iran, have offered themselves as a possible new home for Chinese miners. Castle Island Ventures founding partner Nic Carter said the implementation of the announcement is happening at a rapid pace. He thinks that 50-60% of the total Bitcoin hash rate will end up leaving China.
Bitcoin mining will become more egalitarian as a result
Speaking to Bloomberg about the recent crackdown in China, Novogratz pointed out that it’s about more than just banning mining. However, despite the attack, Novogratz points out that the Bitcoin network is still ticking. He added that the mining exodus from China as a whole will be beneficial to the entire ecosystem as we move forward.
“Listen, the Chinese threw everything they could at Bitcoin, in many ways, right? They have banned mining, they ban leverage, they ban Bitcoin in some places. And Bitcoin still exists, it has survived. In many ways, moving mining out of China will be a big net gain for the ecosystem.“
Bitcoin is often criticized for” centralizing ” the miners operating from China, as estimates say the country is responsible for 65% of the Bitcoin hash rate. However, with the snub by the Chinese authorities, other parts of the world will benefit. The impact of this will be a more equitable distribution of hash power geographically, reducing the risk of a single nation controlling the network“.
But it can take many months to see tangible results, since the relocation of ASIC miners will not happen overnight. In addition, the crypto market has been struggling against negative news for weeks and there seems to be no bright spot in sight so far.
This is also evident in the Bitcoin Fear & amp; Greed Index, which is currently signaling “extreme fear” among investors. Most of the time, however, this is a sign of bottoming out and a Bitcoin buying opportunity, but some traders are watching the market from the sidelines as BTC trades firmly in a wide range between $30,000 and $40,000.
Text credit: cryptoslate