Mining Restrictions in China Open Possibilities to the Rest of the World

By Aleksandra Wilson
4 min read August 24, 2021

How It Started

Back in May, the Chinese government tried to end all the economy involved with mining bitcoin. Big bitcoin miners felt as if they had just won the jackpot. The government in China implemented restrictions that caused the cessation of the majority of bitcoin miners in China. They represent about half of the production of this crypto in the world.

The regions where the miners settled are Xinjiang in the north of the country, in the south Sichuan and Yunnan. Now they are looking for a new place to establish their extraction base. One of the countries considered is Kazakhstan, which seems to be the most convenient option due to its proximity. The last, making it an appealing option for many.

What Does It Mean for the Rest of the Miners In The World?

According to Forbes, the rest of the miners in the world, instead of having only about 2,500 million euros of gross profit, gained access overnight to more than 8,000 million euros. The profit calculated is the result of subtracting half of the world’s income minus electricity costs. The amount is equivalent, for example, to the 8,000 million euros that all listed companies in the United Kingdom have declared in dividends during the first half of 2021.

These are indeed theoretical accounts, approximate and, above all, projected over a whole year when the summer has not yet passed. We should also remember that the Chinese restrictions were announced in May and, although the People’s Bank of China, for the moment, seems willing to maintain regulatory pressure on bitcoin, it is clear that the Government of Xi Jinping has not yet said the latest word.

However, this access to higher-income is already being noticed in some large miners, as analyzed by Forbes magazine itself. One of them is Bitfarm, a Canadian large-scale bitcoin mining company. According to company reports, Bitfarms generated some 6.6 million euros in mining profits in February. But the lack of Chinese competition has skyrocketed the company’s numbers. In July, Bitfarm mined about 391 coins, double the number in February. That amounts to 13.5 coins a day, compared to 7 five months earlier. Even with an average price of bitcoin set at 30,000 euros, Bitfarms has gone to 11.7 million euros in revenue, almost double.

Analysts Anticipate Bitcoin Fever to Be Corrected After Mining Restrictions

But what easy comes, easy goes, even if it takes a while to do so or even if external factors alter a market situation that many analysts hope will take little time to correct. That is the case of Frank Elderson, a banker who is a member of the executive board of the European Central Bank.

In March of this year, even before the Chinese government declared war on bitcoin, the ECB thought it might be interesting for Elderson, through the bank’s own official Twitter account, to chat for a while with tweeters. Elderson then compared what is happening with the price of bitcoin with the tulip crisis, one of the first mass speculative phenomena recorded in the history of the economy. At the beginning of the 17th century, the eagerness to buy, sell and resell this flower raised its price to the absurd figure of 1,000 florins when the annual salary of a well-paid craftsman was about 150.

For experts like Shawn Tully of Forbes, experience says that in markets, what goes up, goes down; what inflates, deflates; and where there are good profit margins for a few, it is finally distributed among other competitors. For now, circumstances conspire in favor of bitcoin miners. On the one hand, China remains willing to eliminate mining stations. On the other hand, we have a global lack of semiconductor materials with which the immense mining equipment is manufactured. That has prevented a good number of cryptocurrency enthusiasts from entering the market and claiming their share.

Load more sync