The Chinese crackdown on virtual currency mining has caused huge market disruption. Late last week Liu He, Financial Stability Development Committee of the State Council in China, announced the government would be enforcing tight restrictions on currency mining. Mining involves the creation of new tokens through high powered specifically designed computer equipment.
This follows the banning of cryptocurrency exchanges in 2017 which led to the country losing its status as a leading trading centre for the virtual currencies. Despite this, China still accounted for 70% of the world’s cryptocurrency mining, according to Reuters, so the announcement has caused uncertainty in the market.
BTC.TOP, a crypto mining pool, suspended its China operations stating plans to move the majority of business to North America. Founder Jiang Zhuoer stated that as a result of these regulations nearly “all of Chinese crypto mining rigs will be sold overseas”. Fellow miner, HashCow, also announced the suspension of Chinese operations.
On Sunday Bitcoin fell by to $33,038 whilst other currencies saw similar falls with Ethereum and Dogecoin falling by 23% and 20% respectively. Bitcoin had previously been at an all-time high with the fall seeing a drop in value of almost 50%. Forbes reported than in total $1.3 trillion was wiped from the total crypto market price.
Increased scrutiny on the environmental impact of virtual currency mining
Last week Elon Musk announced that Tesla would not allow payment for vehicles through Bitcoin due to environmental concerns which caused the price to fall last week. Musk highlighted known but often ignored concerns regarding the environmental impact of mining.
Greenpeace USA will officially stop accepting donations through Bitcoin with the UK arm set to do the same despite the charity being an early supporter of cryptocurrency. The group said to the Financial Times “as the amount of energy needed to run Bitcoin became clearer, the policy became no longer tenable”. Other organizations are expected to make similar announcements.
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The environmental impact is hard to measure but the electricity output of crypto mining globally is said to be similar to that of Sweden which represents a substantial use of power. Going forward if cryptocurrency wants to challenge traditional monetary institutions it must look to a greener future with environmental concerns particularly impactful on modern society.
Crash could lead to a decline in Bitcoin dominance over the cryptocurrency market
Despite ethereum also seeing its value half in the past week many are tipping the cryptocurrency to challenge Bitcoin for market dominance in the coming years.
Forbes revealed that a leaked report from Goldman Sachs has given ethereum a high chance of overtaking Bitcoin as the “dominant store of value”. Estimates by the banking giant put the market capitalization of ehtereum of $250bn compared to $660bn for Bitcoin.
Ethereum is regarded to have more potential with the ethereum ecosystem supporting the majority of new decentralized finance applications. As well as this the ethereum price had outpaced the Bitcoin price in the past year.