Crypto markets have tanked almost 20% over the weekend. Similar to instances in the past, the panic selling has been driven by fear, uncertainty, and doubt (FUD) from China — but there could be a silver lining.
China’s recent crackdown on bitcoin mining operations has accelerated a selloff that began with Elon Musk’s big u-turn on the asset.
With almost $400 billion exiting the cryptocurrency market over the weekend, it has been one of the largest rapid declines in the crypto industry’s short history. Bitcoin tanked as low as $31,000, and Ethereum dropped to nearly $1,700 as new entrants to the markets sold in panic.
Crypto YouTuber and analyst, Lark Davis, commented:
“This current meltdown has been mostly driven by panicked retail investors. News story after news story, most of them inaccurate have shaken the new money. Meanwhile whales have been feasting.”
Anyone with longer-term experience in crypto markets will have seen it all before. This time around, the Chinese mining crackdown may actually be beneficial to the industry in the long run.
Chinese mining pools close up shop
According to a Reuters report on May 24, BTC.TOP and HashCow announced the suspension of their China businesses. BTC.Top cited regulatory risks, while crypto miner HashCow said it would halt buying new Bitcoin rigs.
Additionally, crypto exchange Huobi suspended both crypto mining and trading services to mainland Chinese clients on Monday, stating that it will instead focus on overseas businesses.
BTC.TOP founder Jiang Zhuoer predicted the rise of U.S. and European mining pools in a blog post via Weibo, adding that “Eventually, China will lose crypto computing power to foreign markets as well.”
The renewable silver lining
China currently dominates the hash power pools with an estimated share between 55% and 65% of the total, depending on which source is used for the figures. Renewable energy is used for as much as half of that share, but there is still a heavy reliance on fossil fuels.
In January, mining news outlet Miner Daily predicted a decline in Chinese mining dominance and a rise in its share going to North America. At the time, it estimated that the U.S. had an 11% share of the hash rate, a figure that is now increasing at a faster pace.
Earlier in May, Nasdaq reported that Texas was becoming a mecca for mining operations due to its favorable energy prices.
Bitcoin mining companies like Bitmain, Blockcap, Argo Blockchain, Great American Mining, Layer1, Compute North, Riot Blockchain, and Whinstone are just a few of the major industry players that have chosen to set up shop in the Lone Star State, it added.
A large portion of energy generation in Texas is from renewable sources, such as wind and solar occupying more than 25%. There are also much tighter regulations in the U.S., especially for crypto mining operations.