Chinese authorities will tighten regulation of miners: how the crypto market reacts to it

24-05-2021

On May 24, information about the suspension of activities of some Chinese companies specializing in mining cryptocurrencies appeared online. This is due to the plans of local authorities to tighten the rules of mining and trading of digital assets. At the same time, cryptocurrency exchange Huobi temporarily stopped serving customers from mainland China. 

What’s happening to the crypto market

Until recently, the mining industry was less strictly regulated than other cryptocurrency industries. According to experts, the attention of regulatory authorities to companies mining digital coins is due to the increased demand for crypto-assets. Miners’ fears have more to do with uncertainty than with the regulation itself. Not knowing what restrictions and rules to expect from the Chinese authorities, miners are gradually moving to other jurisdictions with a more clear environment. It is noteworthy that the relocation of crypto miners began even before the notice of a possible ban on mining in Inner Mongolia province. 

The uncertain situation with mining in China significantly affected the bitcoin exchange rate. On May 23 the price of the main digital coin fell to around $31 thousand. May 24, the rate of Bitcoin began to recover and rose above $38 thousand. According to experts, the total hash rate BTC may fall, but the situation is likely to stabilize quickly after the connection of new equipment.

Bitcoin at MAY 2021
Bitcoin at MAY 2021

Prospects for the near future

Analysts suggest that the migration of miners from China will continue in the near future. Cryptocurrency mining companies will look for new locations with affordable electricity prices and more favorable working conditions. Perhaps, acceptable electricity rates will attract the attention of miners to Kazakhstan and Russia. The U.S. is also quite an attractive option for cryptocurrency miners. America is characterized by relatively inexpensive “green” energy, derived from renewable sources. At the same time, investors consider the rules of the game in the U.S. market to be quite predictable.

 

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