Cryptocurrency mining companies have already begun to leave China due to the tough stance of local authorities regarding digital assets. Will this trend continue, and how can it affect the entire industry in the future?
On Monday, May 24, it became known that some mining companies began to stop activities in China due to calls from local authorities to tighten regulation of the mining and trading of cryptocurrencies, and the Huobi crypto exchange has temporarily suspended services to customers from mainland China.
Experts explained whether miners will continue to leave China and how this will affect the entire industry?
Fear of uncertainty
Until now, the mining industry has been less regulated compared to other cryptocurrency sectors, says Vadim Krutov, CEO of blockchain company Bitfury Russia.
According to him, in recent years, the volume of the industry has grown significantly, forcing regulators to show more and more attention.
“More than half of the world’s mining capacities are concentrated in China, so the growing attention of the regulator is not unexpected,”
Most likely, miners are afraid not of the regulation itself, but of uncertainty, since often market players do not know what to expect from the regulator, Vadim Krutov believes.
He notes that the wary attitude of the Chinese authorities towards the industry makes it necessary to move to more predictable jurisdictions of miners.
The migration has already begun
Miners began to relocate to other countries even after it became known about the probable ban on the mining of cryptocurrencies in the Chinese province of Inner Mongolia, recalled Roman Nekrasov, co-founder of the LAZM data center. According to him, mining enterprises have hundreds of millions of dollars at stake, so it would be too rash to take risks and hope that this will not affect their work. The expert believes that the migration of miners from China will continue further.
“It is quite logical that miners are looking for new locations, especially since many countries offer favorable conditions for placing data centers on their territory. In Kazakhstan, Russia – and prices for electricity can be found very favorable, ”added Roman Nekrasov.
There has been a steady downward trend in China’s share for several years now, and this movement will continue, Vadim Krutov is sure.
He noted that more and more institutional investors are appearing on the market, who are accustomed to working in traditional institutional capital jurisdictions, such as the United States, where the volume of inexpensive “green” energy from renewable sources is constantly increasing, and the rules of the game are perceived by investors as more predictable.
Hashrate implications
As a result of the migration of mining companies from China, the total hash rate of the bitcoin network may temporarily drop, but the failure will be quickly filled by connecting new equipment, says the CEO of the blockchain company Bitfury Russia. He explained that over the past six months, only in the public part of the market, more than about $ 1 billion have been concluded transactions with a total computing power of more than 40 EH / s. All this equipment continues to be in the network, increasing the complexity of mining, the expert added.
Obviously, there will be a rebalancing of the distribution of mining capacities in the world, explained the co-founder of the LAZM data center.
“On the other hand, it will even serve to the benefit of the decentralization of the Bitcoin network. Mining centers will be more distributed in different regions and will not be concentrated in China, ”he added.
Market reaction
Against the background of calls for a tougher policy regarding mining in China, the cost of bitcoin on May 23 fell to $ 31 thousand. On May 24, the price of the main cryptocurrency is $ 38.4 thousand. the prohibition of mining, admits Roman Nekrasov. However, then the main cryptocurrency will win back this fall, since miners will stop working in China, but will try to launch new enterprises in other, more friendly jurisdictions, the expert said.
