It is no news that the price of Bitcoin is hanging on a thread these days. Bitcoin had suffered a sharp decline from its previous All Time High of $65,000 in April 2021 to tethering between $35,000 to $30,000. While many have blamed the unstable situations of the market on many factors ranging from institutional buyers to Elon Musk, a new factor has come to play— the China Factor. On June 22, 2020, the price of Bitcoin hit a low of $29,154, from a price of about $35,000 two days before. Just like Bitcoin other top coins followed suit with Ethereum seeing a price range of below $2,000. The sharp price decline caused a stir in the crypto community with many traders blaming China for the fall in Price. The Big question here is—Is China really to blame or did Bitcoin have the fall in price coming?
What exactly did China Do?
China has had its fair share of crypto bans over the years and somehow still manages to stay atop crypto conversations for one reason or the other. However, this time, China is in the news for restricting several financial institutions from accepting Bitcoin and tightening its crackdown on cryptocurrencies. China’s central bank revealed that it had summoned some banks and payment firms such as China Construction Bank and Alipay, and urged them to restrict services provided for the trading of virtual currencies. These institutions were also ordered to cut off payment channels for crypto exchanges and other over-the-counter platforms. While the ban on banking and payment services to crypto-related platforms seems to be responsible for the fall in prices, China released another update. This time, authorities in the southwest province of Sichuan ordered bitcoin mining projects to close.
China accounts for about 65% to 75% of the global distribution of mining power with four Chinese provinces (Xinjiang, Inner Mongolia, Sichuan, and Yunnan) taking the lead. While provinces such as Sichuan and Yunnan run on hydropower making them renewable energy hubs, the other provinces Xinjiang and Inner Mongolia house many of China’s coal plants. Recently authorities in the southwest province of Sichuan ordered bitcoin mining projects to close. Following the announcement of the ban, Bitcoin hash rate dropped by 50%. The regions of Xinjiang and Sichuan alone are estimated to have 50 exahashes per second (EH/s) hash rate or about 30% of the total bitcoin hash rate. Therefore restricting miners in this region from mining will affect the hash rate of the total bitcoin mining population and will in turn affect the price of Bitcoin.
Source: The Block Research, BTC.com
Now, given the circumstances, is China to blame for the fall in the price of Bitcoin? There is no definite answer to that question because the technical analysis will forecast the direction of the price of Bitcoin. However, the price of cryptocurrencies is highly dependent on fundamentals such as news and announcements from famous figures. News such as China restricting bitcoin mining will affect the price of the cryptocurrency in the market. The price of bitcoin has since recovered but with the role played by influencers such as Elon Musk in the crypto market, we may likely see more fluctuations in the price of Bitcoin.