What Do Bitcoin Speculators and Miners Think of Another Strong Regulation of the “Dirty Currency”?

After the storm of Tesla CEO Elon Musk’s shipping and “environmentally unfriendly” comments, the cryptocurrency world has seen another regulatory upgrade from China.

Some people are all in, others are loosening their faith

The “cryptocurrency circle” has been under heavy regulation. on May 21, the financial stability development committee of the state council held its fifty-first meeting, the financial committee especially stressed to crack down on bitcoin mining and trading behavior, and resolutely prevent the transmission of individual risks to the social sector; on May 18, three major industry associations collectively issued a voice, requiring member institutions not to carry out virtual currency exchange and other related financial business. carry out virtual currency trading exchange and other related financial business, etc.

May 19, bitcoin intraday once down to $ 30,000 integer mark, the largest intra-day drop of more than $ 10,000, nearly 30%, a new low since February this year.

In the face of the impact, according to reporters, some of the cryptocurrency speculators who have repeatedly experienced the “waist” market, but expressed calm, there is no shortage of “all in” plagiarism.

“I’ve decided to take a full position in bitcoin.” A miner who has been investing in bitcoin for years told reporters.

But there are also some “believers” whose faith is beginning to disintegrate. They’re worried about the future of global liquidity and regulatory escalation, on the one hand because of the fall of Musk, the “godfather of cryptocurrency.

The cryptocurrency market, which has swollen to $2 trillion, is not what it used to be and poses a threat to the stability of the traditional financial system. The large amount of money flowing in and out of cryptocurrencies may affect the ability of central banks to regulate the economy through the traditional financial system, while the cryptocurrency market, which still relies heavily on the traditional financial system and fiat currencies for purchases and refunds, may also face constant suppression from the existing system.

The common concern in the cryptocurrency world is that once global regulators are determined to strangle cryptocurrencies, there are actually many ways to do so. For example, not only can they cut off fiat currency support for cryptocurrency trading through the banking system, but they can also prosecute and arrest the “godfathers” through the judicial system, and ban all discussion and propaganda about cryptocurrencies through online scrutiny. In addition, potential regulatory maneuvers include the possibility of Apple, Microsoft and Google banning any cryptocurrency wallets and clients from being installed on their operating systems.

Miners are more worried about blackouts

In addition to speculators, miners are a key part of the overall cryptocurrency ecosystem, and they are mostly cryptocurrency holders themselves. Miners and informed sources interviewed by reporters said that most of the mining sites are still operating normally.

“Most of the mining sites are located in Sichuan and Inner Mongolia. Sichuan is mostly hydropower, which is relatively clean energy, and a lot of water resources are not used but actually wasted, so people are not too worried; but Inner Mongolia is all coal-burning, so what people are worried about now is whether environmental actions will have restrictions on mining.” The founder of a cryptocurrency wallet company and former head of a bitcoin mining pool told First Financial.

The head of another Sichuan-based mining pool told reporters that there is still little change in mining operations.

Bitcoin production requires the use of computer arithmetic and is extremely power-hungry, which is a huge income for hydroelectric plants. Since last year, driven by the hot market, the mining revenue of miners has climbed, which in turn has pushed the demand for mining machines to surge, and major mining companies have purchased high-capacity mining machines, hoping to take advantage of the high price of coins and increased mining difficulty to obtain more stable mining revenue by increasing the arithmetic power.

One miner told reporters that bitcoin rebounded to around the $10,000 level when he first entered the market in 2019. At the time, miners’ wealth came from generating a block no larger than 1MB in size (a record of the contents of verified transactions that occurred during those 10 minutes) every 10 minutes or so, strung to the end of the longest chain, with the successful submitter of each block being rewarded with 12.5 bitcoins from the system. “It costs roughly 40,000 to 50,000 yuan a month for 50 miners to pay for electricity (at a constant price of $0.32/kWh), and there is basically a stable income of tens of thousands of yuan every month in 2019.”

“In fact, miners are not too afraid of falling or fluctuating coin prices, as long as they can continue to mine, they can have revenue, the most fear is the power outage.” He claimed. Every year, in May, Sichuan enters a period of abundant water, which is a rare opportunity for miners. But every time the water period turns dry, the mine will lose power for 10 days, and this period is always a torment.

The miners’ fears may now be heightened. On May 18, according to the Inner Mongolia Autonomous Region Development and Reform Commission website, the Inner Mongolia Autonomous Region Energy Consumption Double Control Emergency Command Office issued an announcement on the establishment of a reporting platform for virtual currency “mining” enterprises, stating that the virtual currency “mining” project will be fully cleaned up and shut down. “The announcement said that the virtual currency “mining” enterprise reporting platform will be fully cleaned up and shut down. Earlier, in April, Xinjiang mining plant also had a power outage to check, resulting in a significant drop in bitcoin computing power.

How “dirty” is cryptocurrency?

With the global trend of carbon neutrality, Bitcoin’s energy consumption is also being pushed to the forefront. So how energy-intensive is bitcoin?

Recently, the Financial Times published a feature article entitled “Dirty Money: The Growing Problem of Bitcoin’s Energy Consumption. As mentioned in the article, the latest calculations from the University of Cambridge’s Bitcoin Electricity Consumption index seem to indicate that bitcoin mining uses 133.68 terawatt-hours of electricity per year – a best-guess-based estimate that has been rising over the past five years. years. This puts Bitcoin’s electricity consumption slightly higher than Sweden (131.8 TWh in 2020), while coming in second only to Malaysia (147.21 TWh).

What Do Bitcoin Speculators and Miners Think of Another Strong Regulation of the "Dirty Currency"?

However, the real power consumption figures for bitcoin may actually be much higher. Higher bitcoin prices will attract new miners, mining with older, less efficient equipment.

There are certainly arguments to suggest that a portion of mining activity in China uses clean hydroelectric power. But research from Cambridge University shows that about 75% of miners use some kind of renewable energy, but renewables still account for less than 40% of total energy consumption. Some mining activities may take place off the grid, making it more difficult to track. All of these nuances have an impact that cannot be ignored.

Fasten your seat belt in the cryptocurrency world

For investors, the more concerning topic is: How much further will Bitcoin fall? Some investors may also be concerned about when they can get in on the bottom.

As of now, Bitcoin has not yet fallen to the $25,000 cost of Musk’s holdings. In fact, the price of the coin is even further away from the cost of the “big holdings” of the Gray Fund.

OKlink data shows that the gray fund has a position of 652,900 bitcoins, at an estimated cost of $8.931 billion. In other words, the average cost of each bitcoin is only about $13,700,000.

In fact, the rise and fall of bitcoin is only one side of the story; it’s whether investors can withstand this extreme volatility that’s key. Since October 2020 until this round of declines, bitcoin rose from $10,000 to nearly $50,000. Retracements that occur during a bitcoin bull market are about 33% to 66% of the underlying trend direction advance and last for a week or a few weeks, according to the Euromoney Institute. Even though bitcoin has entered a bull market since January 2021, with a cumulative gain of nearly two times, it has frequently plunged, with daily maximum declines of more than $5,000 on at least seven days, and intra-day maximum declines of more than $10,000 on two consecutive days on Feb. 22 and 23. Such high volatility can cause countless leveraged customers to blow up their positions.

Bitcoin ownership is still very concentrated, with 2% of holders owning 95% of all available bitcoins. Excessive concentration is a risk in itself and can bring about price manipulation; at the same time, too many retail investors and too much speculation are also responsible for the skyrocketing and plummeting of the cryptocurrency world.

What cannot be ignored is that investors who are simply obsessed with Bitcoin’s high-risk rewards should beware – the minutes of the April Fed meeting released on May 20 show that some members believe they should start discussing tapering (tapering) of their purchases of financial assets. This is an important event, as some members’ concerns about inflation and financial risks may be on the rise against the backdrop of a strong economic recovery. the Fed may announce a timetable for tapering at the annual meeting of global central banks in Jackson Hole in August. The cryptocurrency community may want to fasten their seat belts.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/what-do-bitcoin-speculators-and-miners-think-of-another-strong-regulation-of-the-dirty-currency/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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