An Abrupt End For Bitcoin Mining In China: What Really Happened
In 2021, China imposed a nationwide ban on crypto mining and trading, ultimately affecting the hash rate and price periodically. Bitcoin dropped more than 50% due to this, which is said to be a strategic move by China. This move contributed to a massive sell-off in the crypto markets, causing Bitcoin and altcoins to collapse within days. This, of course, posed the question of how impactful government decisions can ultimately be to Bitcoin and its stability.
Once a market moves into the trillions, it becomes rather difficult to simply ignore. With all the attention and the constant creation of new highs, Bitcoin seemed to be on an unstoppable ascent. However, we all know that it does come to an end at some point. At some point, it runs out of steam, usually after giving one final blast. I think that most of us will agree that this time around it definitely was not the case.
The bull market seemed to come to a rather strange and abrupt end. It is interesting to note that China always delivers a death blow at the heart of a Bitcoin bull cycle. Do you really think that this is a mere coincidence? China just happens to make negative decisions regarding Bitcoin when Bitcoin is at its most powerful. The blow in 2017 hit the market quite hard, but its impact on price action was by no means impressive.
Bitcoin Defies The Haters Once Again
Bitcoin managed to bounce back almost immediately, seemingly defying China, before shattering previous highs. Looking back on the cycle of 2017, it is quite evident that the China ordeal simply appears like any other correction that took place during that period. This was a surprise to all of us at the time, perhaps even to China? By this time, mainstream media was painting a picture of a truly unstoppable asset.
I remember all the news stories that came out, especially as BTC went on to reach new milestones and defy the outspoken haters. This was most likely the strongest sign that Bitcoin is truly an anti-fragile asset. An attack on the hash rate is similar to an attack on a human’s bloodstream. It’s a direct attack on the very life of Bitcoin. Visit this article to learn more about free ways to stack more sats!
China Tightens Rules Against Bitcoin: Full Breakdown
A crypto ban was obviously not enough to put Bitcoin down, but what if the country that held 70% of the hash rate banned crypto mining altogether? This is the strategic blow China took in 2021, collapsing the hash rate as miners in China shut down. Obviously, some were able to relocate, while others were unable to finance relocation and other costs. The price of Bitcoin continued to decline until it eventually bottomed out at $29K.
It was at this point that BTC launched a strong comeback, ultimately surpassing the previous all-time high set in April. China was able to send Bitcoin on a detour, causing BTC to fall victim to something far more damaging than a temporary setback. To convey this dynamic, I will need to draw parallels between a journey and a Bitcoin cycle.
What Really Happened During The China-Related Bitcoin Price Collapse
Heading out on a long road trip will require you to fill up your gas tank, especially if there is a long stretch without filling stations. You will factor in slight detours, during which you will take a breather and possibly grab something to eat. Imagine now that you were forced for whatever reason to turn back and travel a significant distance before resuming in the direction of your destination. Do you think you will still reach your destination? No, you won’t, you will run out of gas first.
An Effective Bitcoin Analogy: The Simplest Way To Understand Bitcoin
In a similar fashion, the halving and bullish sentiment act as the fuel for Bitcoin. The fuel to carry it to the projected price destination. Occasional mild detours occur when Bitcoin experiences healthy retracements within the bull cycle. China’s ban on mining is like Bitcoin being sent back along its path before it can resume its journey. In a similar way, Bitcoin used up its fuel on a forced detour.
The last of the bullish fuel was used on the way back to where China had initially diverted it. Now you need to consider what would have transpired had that fuel been used to travel further from $65k, rather than being rerouted back down to the $30K zone. BTC could very well have hit 90K in 2021 if it weren’t for China.
How China Effectively Robbed Bitcoin Of Momentum
In essence, what has transpired through the China ordeal is actually quite devious. China has effectively robbed Bitcoin of approximately 6 months of bullish price action. Forcing BTC to squander its bullish fuel on an unnecessary and unplanned detour. We can argue whether this move was deliberate, but it really doesn’t matter. At the end of the day, the result is the same regardless of intent.
I know a lot of people believe that it is merely a case of diminishing returns and so on. I agree that diminishing returns are an obvious expectation, but I firmly believe that had this ban not taken place, BTC would have reached much higher levels. As I am writing, Bitcoin is slowly edging higher after falling to the $33K mark. So what happens now? Where to from here?
A Filling Station For BTC: Why Bitcoin Pullbacks Can Fuel The Next Move
Bitcoin is currently facing a fuel crisis. For BTC to move higher from here with definitive, convincing price action, new fuel is required. Looking back at the previous bear market, there was a lot of development. DeFi was born in this period, and combined with the halving and other developments, we had the fuel to move higher. I am not exactly sure what it will require, but I am fairly certain that Bitcoin will require some type of breakthrough.
Perhaps in the form of regulatory clarity, combined with more countries adopting BTC as legal tender. Perhaps it is something completely unknown at this point and still to arrive. There are actually quite a few scenarios that could play out for Bitcoin from here. Some are widely discussed, while others I have not yet heard explored that I believe could be a possibility.
Final Thoughts
At this point, one can only remain watchful, waiting for BTC to offer some indication of what is next. As I mentioned in my previous writings, Bitcoin seems to love having the upper hand thanks to its unpredictability. Furthermore, Bitcoin loves breaking its own rules! Stay vigilant and see you in the next edition!