When China’s bitcoin crackdown came into effect, many speculated that the industry would never recover. Amazingly, though, the ban served to highlight both the resilience of the sector and the entrepreneurial spirit of the miners who keep the wheels of the blockchain turning.
Despite the People’s Bank of China (PBOC) deeming crypto-related activities illegal in September[1], bitcoin enjoyed a banner year in 2021, smashing its previous all-time price high (ATH) as institutional players joined the party. Far from representing a death knell, the much-hyped ban barely had an impact in the larger scheme of things.
Dissecting China’s War On Crypto
Anyone who has paid attention will know that China has never been positive about bitcoin. As CoinShares’ chief strategy officer Meltem Demirors cheekily noted[2] in September, “This has to be the 20th time that China has banned bitcoin.”
So, why was this particular clampdown different? In essence, because all cards were now on the table and all of the powers of the state were brought to bear to enforce the ban. While in the past, Chinese financial institutions were forbidden from providing crypto-related services, now all cryptocurrency-related activities — including trading and mining — were outlawed.
In what has been dubbed the “great mining migration,: miners based in provinces such as Xinjiang, Inner Mongolia, Sichuan and Yunnan quickly powered down their rigs and fled to pastures new: Kazakhstan[3], Russia[4] and North America[5]. In the interim, hash rate fell by as much as 50%[6] before rebounding impressively.
To be sure, there are many reasons behind China’s bitcoin ban. Not only were lawmakers spooked by the asset’s volatility, but they were, like various governments around the world, perturbed by their inability to influence it.
