China’s crackdown on bitcoin mining operations came into effect overnight and it sent the price of crypto crashing.
Bitcoin is hovering around the $41,200 (US$31,000) mark, down around 1 per cent, but it’s the alternative coins that have taken more of a beating.
Dogecoin was the worst hit, down around 28 per cent overnight but at the time of writing has recovered slightly to be down around 11 per cent.
So, why is this happening and what does China have to do with it?
China’s crypto crackdown
China announced a range of crackdown measures against cryptocurrency mining in previous weeks but reports coming from the nation suggest the crackdown has become more wide ranging.
China has forced the closure of bitcoin mines in the province of Sichuan overnight, according to the Communist Party-owned paper the Global Times.
Sichuan Province is one of China's largest cryptocurrency mining bases and regulators in other key mining hubs in China's north and southwest regions have taken similar harsh steps.
The Global Times reported that local authorities ordered a halt to mining in the region on Friday amid an intensified nationwide crackdown against cryptocurrency mining.
The ban means that more than 90 per cent of China's bitcoin mining capacity is estimated to be shut down, at least for the short term, the Global Times said.
There had been hopes that because Sichuan uses hydropower regulators it would be more lenient on the mining operations.
However, it would seem the move has cemented the Chinese Communist Party’s stance in trying to curb crypto trading.
"We had hoped that Sichuan would be an exception during the clampdown as there is an electricity glut there in the rainy season,” Shentu Qingchun, CEO of Shenzhen-based blockchain company BankLedger, told the Global Times on Sunday.
“But Chinese regulators are now taking a uniform approach, which would overhaul and rein in the booming Bitcoin mining industry in China.”
Is this the end of cryptocurrency?
Probably not. Crypto traders have been active on Twitter overnight getting #BuyTheDip trending on the platform.
For the believers this is merely a bump in the road, and can even be seen as a positive move towards further decentralisation of bitcoin.
Stephan Livera, host of the popular bitcoin podcast, The Stephan Livera Podcast, told Yahoo Finance that he’s expecting more dips to come, but that this is nothing to be concerned about.
“Hashrate (a measure of the computational power per second used when mining) really is shifting out of China towards other countries,” Livera said.
“While it will be painful for Chinese mining operations, it is long term good for Bitcoin's decentralisation across multiple countries.
“I'm expecting further temporary hashrate drops as equipment is shifted or sold to miners in other jurisdictions before coming back online.”