China’s crackdown on Bitcoin (BTC) mining may have unintended benefits for BTC price action, one analyst suggests.
In a tweet on June 18, Charles Edwards, CEO of investment firm Capriole, argued that the Chinese miner exodus was already lowering Bitcoin’s potential price floor.
Don’t believe the China FUD
As a shake-up sees Bitcoin hashing power redistributed away from China, Bitcoin’s electrical cost — the combined cost of keeping the network running — is dropping.
As Edwards notes, this “Bitcoin production cost” is very rarely crossed by spot price. In becoming lower itself, the indicator thus opens up the possibility of another price dip, one which nonetheless has been followed by bull runs in the past.
“Don’t believe it: China mining fud is not healthy for Bitcoin,” he commented on an accompanying chart of Bitcoin production cost.
“Why? It lowers the bitcoin electrical cost, the historic price floor for Bitcoin. This is the price Bitcoin almost never goes below, and it’s been falling.”
Looking at historical performance, similarities to 2017 are immediately apparent. During that year, Bitcoin saw a run to two local peaks with a significant retracement in between. That event also witnessed spot price dipping below the upper production cost boundary.
“A nuisance for Bitcoin”
As Cointelegraph reported, seasoned Bitcoiners have complained about the spin given to changes in China’s mining scene, which has often been flatly negative.
They point out that Bitcoin is not dependent on Chinese miners, and that a redistribution of hashing activity will naturally follow as the network seeks ever more efficient ways of expanding.
“The Chinese crackdown on mining is a tragedy for China, a nuisance for Bitcoin, and a windfall for North American Bitcoin miners,” Michael Saylor, CEO of MicroStrategy, summarized on Thursday.
He was responding to news that mining company Bitfarms will shortly debut on Nasdaq, in so doing becoming the largest publicly-traded miner in North America. Its activities will use a reported 99% renewable energy.