After Tesla CEO Elon Musk (Elon Musk) delivered the crit of “unenvironmental protection” remarks, the currency circle ushered in China’s regulatory upgrade. Where will the “dirty currency” go?
Over the past week, Bitcoin has fluctuated violently, with an amplitude of around $10,000. As of 18:30 on May 23, Beijing time, the price of a bitcoin was reported at US$35,241. It rebounded above US$40,000 last week after the regulatory news. In April of this year, Bitcoin hit an all-time high of $64,374.
Some people all in, some people loose faith
On May 21, the Financial Stability and Development Committee of the State Council held its 51st meeting. The Financial Committee specifically emphasized cracking down on Bitcoin mining and trading activities and resolutely preventing individual risks from being transmitted to the social field. On May 18, China’s three major industries The association collectively voiced that the “currency circle” ushered in heavy supervision and rectification, and the association required member institutions not to carry out virtual currency exchange and other related financial services.
In the face of the shock, according to the reporter’s understanding, speculators in the currency circle who have repeatedly experienced “half-cutting” in the market have expressed their calmness, and there are also many bargainers who shouted “All in”. Bitcoin once dropped to the $30,000 mark in intraday trading on May 19, with the largest intraday drop exceeding $10,000, nearly 30%, which was a new low since February this year.
“I have decisively entered Bitcoin with my full warehouse.” A miner who has invested in Bitcoin for many years told reporters.
However, the beliefs of some “believers” began to disintegrate. On the one hand, they are because of the defection of “the leader of the currency circle” Musk, on the other hand, they are also worried about the future decline of global liquidity and the upgrade of global supervision.
At present, the cryptocurrency market that has swelled to 2 trillion US dollars is not what it used to be. It can be said that it has posed a threat to the stability of the traditional financial system. A large amount of funds entering and leaving the cryptocurrency may affect the central bank’s ability to regulate the economy through the traditional financial system. The cryptocurrency market, which still relies heavily on the traditional financial system and legal currency for purchases and withdrawals, may also face constant suppression from the existing system.
The general concern in the currency circle is that once global regulators are determined to strangle digital currencies, there are actually many ways to do it. For example, not only can the banking system cut off support for the purchase and sale of cryptocurrencies with fiat currencies, but also prosecute and arrest “masters” through the judicial system; in addition, through online censorship, all discussions and propaganda about cryptocurrencies are prohibited. In addition, potential regulatory tactics include the possibility of allowing Apple, Microsoft and Google to prohibit the installation of any cryptocurrency wallets and clients on their operating systems.
Miners are more worried about power outages
In addition to speculators, miners are also a key part of the entire cryptocurrency ecosystem, and most of them themselves are cryptocurrency holders. Miners interviewed by reporters and people familiar with the matter said that most of the mines are still operating normally.
“Most of the mines are located in Sichuan and Inner Mongolia. Sichuan is mostly hydropower, which is relatively clean energy. A lot of water resources are actually wasted if they are not used. Therefore, everyone is not too worried; but Inner Mongolia burns coal, so everyone is worried now. The question is whether mining will be restricted under environmental protection actions.” The founder of a cryptocurrency wallet company and the former head of a Bitcoin mining pool told reporters.
Another person in charge of the mine in Sichuan reported to reporters that there is still no change in the operation of the mine.
Bitcoin production requires the use of the computing power of the computer and is extremely power-hungry, which is a huge wealth opportunity for hydropower stations. Since last year, driven by the hot market, the mining revenue of miners has risen accordingly, which has driven the demand for mining machines to surge. Major mining companies have purchased more high-power mining machines, hoping to take advantage of the current high price of coins and mining Under the background of increasing difficulty, more stable mining income can be obtained by increasing computing power.
A miner told reporters that when he first entered the market in 2019, Bitcoin rebounded to about $10,000. At that time, the wealth of miners came from generating a block of no more than 1MB in size every 10 minutes or so (recording the verified transaction content that occurred within these 10 minutes), connected to the longest chain tail, and each block’s Successful submitters will be rewarded with 12.5 Bitcoins in the system. “A month for 50 mining machines will probably cost 40,000 to 50,000 yuan in electricity (according to a constant electricity price of 0.32 yuan/kWh). In 2019, there will be a stable income of tens of thousands of yuan every month.”
“In fact, miners are not too afraid of currency price drops or fluctuations. As long as they can continue to mine, they can make profits. The most feared thing is power outages.” He said. In May of each year, Sichuan enters a wet season. For Bitcoin miners, this is a rare opportunity. But he recalled that the mine would have power outages for 10 days when the wet and dry seasons changed, and this period of inversion of electricity bills was always a painful period. Therefore, some miners are now jittery about the uncertainty of future mine supervision.
How “dirty” is cryptocurrency?
In the eyes of many people, this round of currency slump is actually more of Musk’s pot.
“China banned Bitcoin trading earlier, and the association’s statement is more of an emotional impact. In fact, if it weren’t for Musk’s previous continuous calls, Bitcoin might have fallen long ago.” A cryptocurrency exchange person Tell reporters.
Under the trend of global carbon neutrality, Bitcoin’s energy consumption problem has been pushed to the forefront. So how much energy does Bitcoin consume?
Recently, the British “Financial Times” published a feature article entitled “Dirty Currency: The Increasing Problem of Bitcoin Energy Consumption”. As mentioned in the article, the latest calculation of the Bitcoin Electricity Consumption index by the University of Cambridge seems to indicate that Bitcoin mining consumes 133.68 terawatt-hours of electricity each year-this estimated figure based on best guesses in the past Rising continuously in 5 years. This makes Bitcoin’s power consumption slightly higher than Sweden (131.8 TWh in 2020) and second only to Malaysia (147.21 TWh).
However, Bitcoin’s true power consumption figures may actually be much higher. The rise in the price of Bitcoin will attract new miners and means that mining with older, less efficient equipment will be financially sound.
Of course, there are also opinions that some of China’s mining activities use clean hydroelectric power. But Cambridge University’s research shows that about 75% of miners use some kind of renewable energy, but renewable energy still accounts for less than 40% of the total energy consumption. Some mining activities may be carried out outside the grid, which increases the difficulty of tracking. All these nuances have an impact that cannot be ignored.
Fasten your seat belt
Nowadays, investors may be more concerned about the topic-how much more Bitcoin can fall? When can I enter the market for bargain hunting?
At present, Bitcoin has not yet fallen to the cost price of Musk’s holdings of $25,000. In fact, the currency price is far from the cost price of the “large currency holders” gray fund.
According to OKlink data, Grayscale holds 652,900 bitcoins at an estimated cost of 8.931 billion US dollars. In other words, the average cost of holding a bitcoin in Grayscale is only about 13,700 US dollars.
In fact, Bitcoin’s rise is only one aspect, and whether investors can withstand such extreme fluctuations is the key. From October 2020 to this round of decline, Bitcoin has risen from $10,000 to nearly $50,000. According to the Ouyi Research Institute, the retracement that occurs in the Bitcoin bull market is approximately 33% to 66% of the advancement of the basic trend direction and lasts for a week or several weeks. Even though Bitcoin has entered a bull market since January 2021, it has risen nearly twice, but it often plummets. Among them, the biggest daily drop of more than 5,000 US dollars has at least 7 days, and two consecutive days on February 22 and 23 The biggest drop in the day has exceeded 10,000 US dollars. Such high volatility will cause countless leveraged customers to burst their positions.
Bitcoin ownership is still very concentrated-2% of Bitcoin holders own 95% of all available Bitcoin. Concentration itself is a risk. Too many retail investors and excessive speculation are also the reasons for the sharp rise and fall of the currency circle.
It cannot be ignored that investors who are simply obsessed with the high risk returns of Bitcoin should beware. The minutes of the April Federal Reserve meeting released on May 20 show that some members believe that the Fed should start discussing the size of the Fed’s tapering of financial assets. ). This is an important event. In the context of a strong economic recovery, some committee members may be worried about inflation and financial risks. The Fed may announce a timetable for balance sheet reduction at the Jackson Hole annual meeting of global central banks in August. The coin ring may have to fasten the seat belt.
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.