Riot Blockchain CEO Still Upbeat After China’s Bitcoin Mining Ban

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China has slammed the whip on bitcoin miners, but it’s not all bad news. Riot Blockchain CEO Jason Les said adjusting the bitcoin mining difficulty rate is a good thing. Top crypto experts have three reasons they are bullish on bitcoin despite the mining exodus in China. Loading Something is loading.

China’s tumultuous relationship with bitcoin and other cryptocurrencies is nothing new.

The country first banned financial institutions from handling bitcoin transactions in 2013, arguing that the digital asset was just a “virtual good” that did not have legal status as a currency.

Then, in 2017, China made initial coin offerings (ICOs) illegal and enacted a ban on trading in bitcoin and other digital currencies.

Despite these bans, bitcoin miners continued to operate in the country (accounting for around 65% of global bitcoin hash rate output) until the summer of this year, when Chinese authorities began shutting down facilities. bitcoin mining nationwide.

The new crackdown exacerbated an already downtrend for bitcoin after the world’s leading digital asset hit a record high of over $ 65,000 in April, only to briefly drop below $ 30,000 following reports of ESG concerns and a U-turn from Tesla on accepting bitcoin payments.

Still, Jason Les, CEO of Riot Blockchain, one of North America’s largest public bitcoin miners, told Insider that the Chinese exodus from bitcoin mining has some advantages.

Perhaps the most important of these is the next downward adjustment to the difficulty rate. Les said that as miners move out of China, fewer and fewer mining operators compete to mint new bitcoins, dramatically reducing the difficulty of mining each new coin.

The CEO expects the difficulty of minting new bitcoin to drop by around 20% on July 1, when the new mining difficulty rate goes into effect. The drop should be a boon for already operating public miners like Riot Blockchain, Hut 8 Mining Corp. and Marathon Digital Holdings.

Les also noted the beneficial effect the Chinese bitcoin mining exodus will have on ESG concerns and this is good for miners and investors.

“With so many miners in these coal-fired regions of China, if they stop mining, it will only further increase the global production mix for mining bitcoin for renewable energy,” Les said. .

Alexander Blum, co-founder and managing partner of digital asset investment products firm Two Prime Digital Assets, said other countries will start “rolling out the red carpet” for bitcoin miners as they are leaving China.

Blum said the miners are already moving to regions like Latin America, Kazakhstan and even Texas. His claims regarding what some are calling “the great mining migration” are supported by new reports of Chinese bitcoin miners moving operations to Kazakhstan and even airlifting mining machines to the United States.

Jack McDonald, CEO of PolySign, a company specializing in digital asset custody solutions for institutional investors, pointed out that the recent drop in the price of bitcoin has also resulted in a healthy unwinding of leverage for traders and Investors.

While China’s bitcoin mining ban may have scared off new entrants to the crypto space, industry veterans see the bright side and remain confident that bitcoin will be successful in the long run. . Below, Insider has detailed three of the many reasons why.

Institutional investment

Institutional investment in digital currencies has long been seen as one of the keys to securing the position of the asset class. While some market commentators feared that bitcoin’s decline from record prices could push institutional investors out the door, experts still see strong demand for digital assets from institutions.

“We’ve had a lot of interaction with institutional investors over the past three weeks,” McDonald said in an interview with Insider on Friday. “We spoke to 35 to 40 institutional clients, and I can tell you that the level of interest in investing in this space is extremely high. For many, lower prices are actually an opportunity to enter the market at a more attractive price. . “

Blum explained to Insider that institutions evolve slowly and that it takes time for their presence to be felt in the crypto space.

He also said that greater integration of digital assets in small banks in the coming years will make it easier for consumers to buy, sell and hold bitcoin through their bank accounts.

“There is still a lot of institutional money intending to buy and hold bitcoin,” Blum added.

The growing derivatives market

The derivatives market for cryptocurrencies has recently seen tremendous growth. A one-of-a-kind study published in April at Carnegie Mellon University found that on a busy day over $ 100 billion in cryptocurrency derivatives are traded, which rivals the daily volume traded at the New York stock exchange.

From major derivatives exchanges like BitMex to more store options, the derivatives market for cryptocurrencies is exploding.

Two Prime Digital Assets by Alexander Blum is a prime example of this growth. His company helps investors gain exposure to bitcoin and etheruem by leveraging volatility, capturing the upside, and reducing downside risk using derivatives.

Blum said he sees significant investor interest in the space and in terms of derivative position, calls around $ 50,000- $ 60,000 that expire in September are very popular, which gives him a bullish outlook on bitcoin’s current trajectory.

Unsustainable fiscal and monetary policy / Inflation

Supply constraints and a historic economic rebound have pushed current inflation indicators, such as the Consumer Price Index (CPI) and basic personal consumption expenditure (Core PCE), to multi-year highs.

As the Federal Reserve maintains an ultra-accommodative monetary policy and the Biden administration spends trillions of dollars on infrastructure and other programs, some market commentators are starting to fear that the current trajectory is unsustainable and could lead to a downturn. sustained rise in inflation.

McDonald of Polysign says if inflation continues to rise, it could be a boost for cryptocurrencies, especially bitcoin.

“I think a lot of market sentiment lately is concerned about inflation and just like gold, I think cryptocurrencies, and bitcoin in particular, are seen as a hedge against it. ‘inflation,’ McDonald said.

Riot Blockchain CEO Jason Les also said we are in an “unprecedented” era of government spending and money printing, and that he believes rising inflation will spark continued interest in bitcoin.

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