Crypto News

Are Chinese miners behind the latest Bitcoin price crash?

Bitcoin, BTC, China, miners
Image by Tumisu from Pixabay
  • Bitcoin sank to its lowest point since January 2021
  • Chinese government intensified shutting down coin mines across the country
  • Miners have to relocate and subsequently liquidate their BTC funds.

Yerevan (CoinChapter.com) – China intensified its crackdown on Bitcoin (BTC) miners in the Southwest, as announced on Sunday, June 20. In response, Bitcoin sank to its lowest point since January 2021. The token traded at $29,864 in the European session Tuesday.

The alpha crypto crashed right past the significant support line at approximately $30,000. The next support in sight might come from the $22,700 margin, significant in late December 2020.

BTC at its inter-year low. Source: BTCUSD on TradingVIew.com
BTC at its inter-year low. Source: BTCUSD on TradingVIew.com

Also read: Bankruptcy risks cloud MicroStrategy as it announces another Bitcoin purchase

Governmental regulations

As estimated by Cambridge, 65-75 percent of global Bitcoin mining happens in China. Local authorities ordered to shut down the mining in Sichuan Province, among others, one of the largest mining bases in China. The crackdown will continue, as the government authorities plan to fold 90 percent of the mining capacity in the country.

Furthermore, on Friday, the Sichuan Provincial Development and Reform Commission together with the Sichuan Energy Bureau put pressure on local electricity companies to oversee the process of “terminating” the mining operations in their areas by Sunday.

The Chinese government has long entertained the plan of launching a digital Yuan. The solid time frame is not yet public knowledge. However, Michael Novogratz, an ex-hedge fund manager and the CEO of Galaxy Investment Partners, thinks that seeing Bitcoin as a threat to national currency is faulty, as the crypto is more of a “store value, like digital gold” than “money, and transactional currency”. He also stated that he wasn’t worried about the plunge.

Also read: Bitcoin week ahead Ep08: Early Monday sell-off towards $32K spells trouble

Charles Hayter, the CEO of CryptoCompare, a crypto data firm, said in an interview with CNBC, that when China sneezes, Bitcoin catches a cold. He was not surprised at the turn of events. The executive asserted that such regulations have happened at least three times in the past.

China’s miners are not convinced, however. On the other hand, they might bear part of the blame for the latest Bitcoin crash.

Bitcoin miners are selling?

Bitcoin miners in China are in a position to either call the quits or relocate their activity outside the country.

According to glassnode, the mean hash rate has declined by 16 percent. Along with the challenges associated with finding a new facility and preferable access to hydro, or wind power, many miners are likely to liquidate their BTC holdings, at least in part. Sell-offs are partially aimed at financing difficult logistics and possibly exiting the industry altogether.

The accumulation trend in the mining community has switched to distribution during the past two weeks.

Bitcoin accumulation vs. Distribution trends. Source: Glassnode.com
Bitcoin accumulation vs. Distribution trends. Source: Glassnode.com

The major shift in miners’ distribution rates has partially sent Bitcoin even lower in price, undermining the possible recovery.

After China’s government regulations shut down Bitcoin mining, the crypto dove into a downward spiral. BTC is at its intra-year lowest of $29,864 in the European session Tuesday. China is the biggest mining base in the world (65 percent at least). Many miners have to sell their BTC treasuries, use the funds to relocate their equipment, or else, quit the industry altogether.

Also read: Cardano confers BTFD opportunity as ADA eyes 15% price crash

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Lilit Chichyan

Lilit is an enthusiastic writer, skilled in 3 languages, and interested in writing about the tech world, trading, art, and science. She also has a background in psychology and marketing, which helps deliver the right message to the target audience. Lilit is creative and fast and has the experience of writing for both big marketing companies and small websites and blogs.

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