Bitcoin prices surge despite China's crackdown on cryptocurrency mining
Country's cryptocurrency mining capacity bounces back
Published: Sep 07, 2021 07:40 PM
Bitcoin, a type of cryptocurrency Illustration: VCG

Bitcoin, a type of cryptocurrency Illustration: VCG

Bitcoin prices continued to rise and surged above $52,000 on Tuesday after breaking the threshold of $50,000 over the weekend, bringing market sentiment to a positive zone despite China's crackdown on crypto-currency mining, insiders told the Global Times.

Bitcoin prices on Tuesday rallied after El Salvador on Tuesday became the first country in the world to accept Bitcoin as legal tender. The price per Bitcoin was about $52,486, up 1.5 percent in the last 24 hours, according to Coinbase.

The rally has revived enthusiasm among Chinese traders, with hiring of Bitcoin miners, advertising for Bitcoin-mining machines and discussion of ongoing projects spreading through the market.

An industry insider, who spoke on condition of anonymity, told the Global Times on Tuesday that he estimated China's crypto mining capacity had bounced back by up to 50 percent, compared with the low point in June, amid the government's sweeping crackdown on the industry.

"Most of them are small-scale mining projects, which consume less electricity than larger ones, powered by abundant hydroelectric resources in Southwest China's Sichuan Province," the insider said, noting that such projects are hard for regulators to detect.

Amid the crypto price rally, there will be more and more such small-scale mining projects as profits are attractive, he added.

The source added that large-scale mines that migrated overseas will not opt to move back to China in the short term.

Inside a Bitcoin mining factory 
Photo: AFP

Inside a Bitcoin mining factory Photo: AFP

Another industry insider confirmed to the Global Times on Tuesday that discussions on crypto mining heated up in recent days after Bitcoin reached the psychological point of $50,000 a unit.

"The price of graphic cards for mining machines dived in previous months, but now it is rebounding due to surging demand," the insider said. 

That is in line with the situation of the crypto industry, as many initial coin offerings (ICO) projects launched by Chinese firms planning to list in overseas exchanges - but suspended amid tightened scrutiny and a lackluster market - re-launched in recent days. 

"There's a bullish sentiment spreading across the market, with some friends and relatives calling me for ways to evade market regulation and invest in potential ICOs," the insider said.

Despite the rebound in sentiment, there won't be a large-sale return of mining businesses amid China's intensified nationwide crackdown, Cao Yin, managing director of the Shanghai-based Digital Renaissance Foundation, told the Global Times on Tuesday.

In a bid to curb speculative crypto trading and control financial risks, Chinese authorities ordered Bitcoin mines in Southwest China's Sichuan Province, one of China's largest cryptocurrency mining bases, to close down in late June. 

It is estimated that more than 90 percent of China's Bitcoin mining capacity has been shut down as regulators in other key mining hubs in the nation's  north and southwest regions have taken similar harsh steps.

"Most of China's miners have gone overseas with the mining machines moved out and the exchanges closed. There will still be people mining, but the majority has been cut out," Cao said.