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After China announced it would start stepping up efforts to restrict cryptocurrency mining, the price of bitcoin (BTC-USD) fell below $ 30,000 earlier this week, trading at a value never seen since the start of the new year. The cryptocurrency has since rebounded slightly, holding a level slightly above $ 32,000.
While the news and subsequent crash may have caused some short-term headaches in the crypto market, China’s crackdown on mining may actually benefit crypto in the long run, some experts say.
I think this is actually fantastic news for the Bitcoin ecosystem, Blockchain.com co-founder and CEO Peter Smith told Yahoo Finance Live. You will see a diversification of mining operations around the world. We have seen this trend over the past couple of years as large mines are being built in Europe, the United States and a variety of other geographic locations, but this trend is going to accelerate sharply now.
Smith cited growing concern that Bitcoin mining is becoming too heavily concentrated in mainland China as the reason for a positive outlook on the crackdown. He predicts that over the next three to four years this will produce a net positive for crypto as mining companies sell their bitcoin and move their operations overseas.
Chinese mining companies have already started planning to move their operations overseas, with companies eyeing countries ranging from the United States to Kazakhstan. According to Chris Zhu, owner of Chinese mining services platform INBTC, around 10-20% of miners in China have already started their movement.
An employee works at the data center of the BitRiver company providing cryptocurrency mining services in the city of Bratsk in the Irkutsk region of Russia on March 2, 2021. BitRiver offers hosting services and turnkey solutions for cryptocurrency mining operations to institutional investors, including bitcoin mining companies. Photo taken March 2, 2021. REUTERS / Maxim Shemetov
“We took about ten days to get to Sichuan, only for the operations to stop there as well,” Zhu told AFP. “It’s going to be hard to continue here.”
As for the implications of Beijing’s restrictions on mining in terms of the environment, social and governance (ESG0, Smith believes that there is not enough information available to make a judgment. vast majority of mining operations under construction today are powered by some form of clean energy.
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You’re going to see mining companies start to disclose where they get their energy from, Smith added. And for the most part, Bitcoin mines are powered in places where energy costs are really low.
Crypto mining issues around social impact need to be addressed before big asset managers start major investment campaigns, Smith said. Ultimately, he believes this will happen once new data is released regarding the energy supply and use by mining operations.
The ESG issue, however, is one that you need to address over the next five years as you start bringing bigger and bigger funds into space, like your BlackRocks (BLK) and Blackstones (BX) of the world. , said Smith. So I don’t think it’s the institutions that sell because they suddenly realized there were ESG issues. I think that somehow limits the institutions that can enter that space until this is resolved.
Thomas Hum is a writer at Yahoo Finance. Follow him on Twitter: @thomashumTV
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