A lot has happened in recent weeks in the crypto market and some interesting news is beginning to shape the future of the market. How much impact these developments would have on the growth or decline of the crypto market is yet unknown, nonetheless, the wise thing to do is to go through the facts on hand and project a plausible outcome.
Most notable of these developments is the news filtering in from the far east that we just might witness a China-imposed ban on crypto mining. Interestingly enough, in the past, a development of this magnitude would have had a devastating impact on the prices of digital assets. Instead, the market seems unbothered and crypto has continued its uptrend. So, what makes this particular one different? Will the crypto market eventually feel the full impact in the near future?
Before we dissect its ramifications, let us take a look at China’s history with crypto-related bans and why the country’s take on virtual money could hurt or make the market.
China Love/Hate Relationship With Crypto
Before the whole ICO fraud scare that led China to ban the fundraising mechanism in 2017, the country was one of the most dominant territories in the crypto space. It topped the list of regions with the most crypto exchange activities and adoption was booming. Investors from China were pulling all the strings and everyone had predicted that the country would lead the next phase of crypto’s mainstream adoption. The same was true for crypto mining as it became the largest hub for bitcoin mining.
Almost two years after the ICO ban, not much has changed. Regardless of the various moves by the government to stifle crypto within its borders, crypto continues to remain vital to the country’s economy. For one, the country still houses some of the most prominent crypto exchanges like Binance and Huobi. Also, the current blanket ban on crypto has done little to stop its citizens from exploring the benefits of owning and trading crypto.
Needless to say, crypto remains attractive, even in hostile regions, because it affords people a lifeline other than the centralized model of fiat currencies. So, it is almost improbable that China’s huff and puff would do much to discourage its citizens’ interest in crypto. However, its stance has done enough to make it difficult to access digital assets.
Now to the case of crypto mining. You see, China is home to a humongous percentage of the global mining market and a company, in particular, Bitmain is responsible for 39% of the world’s mining operations. In fact, many in the crypto space believe that Bitmain is the most influential crypto firm. it has evolved into a household name that manufactures some of the most sophisticated machines for mining. It is safe to say that this crypto mining powerhouse would have to find a new home, considering the possibility of a crypto mining ban.
What Would An Imminent Ban Mean To The Crypto Market?
Earlier, it was mentioned that decisions like this always tend to have an impact on the prices of crypto and though this is a norm, the reaction to this particular development seems very peculiar. Instead of the downturn that many expected, the market was defiant and it has continued its resurgence. What we have learned so far is that people are no longer taken aback by China’s battles with crypto. Plus, a lot of people believe that China would not go through with the ban.
Nevertheless, if the ban comes into effect, then mining firms in this country would have to say goodbye to China’s cheap and fossil fuel-dependent power. In a way, this would quench the ongoing debate on crypto’s contributions to the rising carbon levels in our atmosphere. Secondly, an exodus of the country’s mining powerhouse, as well as the probable crippling of operations of the smaller ones, would have an adverse effect on the supply of crypto, bitcoin in particular. And from our understanding of basic economics, if the supply doesn’t match the demand, then the prices will skyrocket.
In other words, the ban could help Bitcoin’s price rally. Apart from this, this scramble and relocating could change the status quo in crypto space. Bear in mind that there is a lingering debate on China’s dominance in the crypto mining market, which many believe poses as much threat to the viability of crypto as current scalability issues. The security of crypto depends on the decentralization of its mining nodes and already some experts suggest that companies like Bitmain already control a threatening amount of bitcoin mining infrastructure.
This, coupled with the growing rate of crypto mining activities establish China as a dominating territory and this could adversely affect crypto, that is if the government chooses to take advantage of its exploding mining market. Therefore, the reshuffling of the market could help reassure us that crypto is safe from central manipulations. By so doing, the crypto market would eradicate doubts over its viability.
Although China’s decision to ban crypto mining seems to spell doom for crypto, a broader look at the situation reveals that this development would help the crypto market attain a level of maturity that could open more doors for mainstream adoption.