It plummeted by 30% overnight, the price in a month was almost “halved”, and those who had liquidated their positions were empty-handed… Recently, the prices of virtual currencies such as Bitcoin have soared and plummeted, which aroused the exclamation of onlookers and the lament of investors. From mining to trading to financing, chaos in the “currency circle” has been raging, and the supervision and rectification have been struck, and investors should stay away from virtual currency trading hype activities.
Crazy mining under the guise of “data center”
On the desolate river bank, in a simple factory building made of steel pipes, color steel plates and other materials, nearly a thousand computer hosts on rows of large iron racks are running at high speed, emitting waves of heat, and fans are humming.
If it is not a local, few people know that this is a Bitcoin “mine”. The car that delivers meals to the “miners” departs from Guzan Town, Kangding City, Sichuan Province every day. It takes more than half an hour to arrive through a dirt road that is not on the map.
There are not a few “mines” hidden in deep mountains and valleys like this in western Sichuan. “Miners” are focusing on cheap hydropower resources here. Many of them are engaged in Bitcoin mining under the guise of “data center” under the name of “hydropower consumption.”
“Where the electricity price is cheap, we will go wherever we go.” A “miner” told reporters that during the spring and summer seasons, they usually dig in western Sichuan. When the winter comes, he will “fight” in Inner Mongolia, Xinjiang and other places, using thermal power to continue digging. .
Regardless of whether Bitcoin is a virtual commodity, it is time-consuming and labor-intensive to obtain a Bitcoin, and it needs to be continuously calculated by a computer according to an algorithm, commonly known as “mining.” “Mining machines” specially used for mining bitcoins appeared on the market. Some people bought “mining machines” on a large scale to form a “mine”, and “excavated” day and night…
“As Bitcoin is digging less and less, operating a’mine’ will have to face higher capital investment and a longer return period.” A “miner” told reporters that in the past, dozens or hundreds of units were purchased. Enter the “mining machine”, now there are thousands of them at every turn. Some “mines” consume millions of kilowatt-hours of electricity a day, and many use electricity directly from hydroelectric power stations.
There was also a “miner” who proudly told reporters that the annual electricity consumption of his “mine” in a certain place in the southwest was equivalent to the total annual electricity consumption of the three cities.
According to industry insiders, not only Bitcoin, but with the continuous advent of virtual currencies such as Ethereum and Dogecoin, the power consumption of the entire virtual currency mining is exploding, and most of these “mines” are concentrated in my country. Will put tremendous pressure on energy supply.
“Currency circle” speculative trading is risky
Virtual currency is called “currency” but it is not real currency, and cannot be used as currency in the market, let alone speculation. However, driven by interests, there are still people who take the risk and turn a blind eye to the risks of false assets, business failures, and investment speculation in the “currency circle” transactions.
——The “bookmaker” sets up bureaus to manipulate prices. According to industry insiders, most virtual currencies, including Bitcoin, have a large number of holders, and it is not difficult for them to manipulate market prices in the bank.
“Take a certain currency as an example. The top 10 holding addresses have nearly 40% of the circulating tokens. As long as a large number of holders have the same goal, it is very easy to control the price.” The person in charge of a virtual currency overseas trading platform revealed to reporters, 5 On the 19th of the month, the currency fell more than 50%, which was less than one-third of the previous price peak. Many investors suffered heavy losses.
——Borrowing corpses to revive souls, “air coins” have been repeatedly banned. Under the heavy blow of policy, the domestic initial coin offering (ICO) has almost been eliminated, but many platforms have transferred transactions to overseas platforms, but the main battlefield for issuance and publicity is still in China, and they are trying to bypass the risk control of domestic financial institutions to recharge transaction.
“Recently Dogecoin has skyrocketed. I think people have a soft spot for the currency of animal names, so they invested in Shiba Inu coins, which rose by more than 20 times in just a few days. However, the price has plummeted recently and almost all profits have been taken back.” Investors Liu Peng said.
Encouraged by this blind investment mentality, more exotic “air coins” have begun to emerge, and cat coins, pig coins, and eel coins have emerged one after another…These “air coins” that have no physical support and no application value, once the tide floods Retreat will bring huge losses to investors.
——Leveraged trading magnifies investment risks. In the violent market volatility of virtual currencies, many investors tried to “turn bicycles into motorcycles” with leverage, and often lost their money.
In January this year, Mr. Zhou entered the currency circle with 500,000 yuan of funds, and within a few months the book funds rushed to 3 million yuan. Recently, Bitcoin has plummeted again and again. At its worst, he faced losses of tens of thousands of yuan every few minutes. Mr. Zhou, who was unwilling to shrink his funds, made a desperate move and increased leverage to buy the bottom, but unexpectedly, Bitcoin’s plunge again triggered a liquidation, and all 3 million yuan soon “evaporated”.
The transaction data provided by the third-party platform shows that as of 15:00 on the 25th, more than 140,000 virtual currency leveraged transactions in the past 24 hours have been liquidated, with an amount of 4.641 billion yuan. On the night of the 19th, the liquidation amount exceeded 40 billion yuan.
Stay away from virtual currency trading hype activities
Relevant departments in my country have long been aware of the risks brought about by virtual currency trading hype, early warnings have been made, and several measures have been issued to rectify them.
In 2013, five departments including the People’s Bank of China jointly issued the “Notice on Preventing Bitcoin Risks”, requiring all financial institutions and payment institutions not to carry out Bitcoin-related businesses. In 2017, the central bank and other seven departments called for the suspension of various types of token issuance and financing, and carried out special rectification. Subsequently, my country’s virtual currency trading platforms and ICO trading platforms basically achieved risk-free exits, and the global share of Bitcoin transactions in RMB fell to less than 1%.
Nevertheless, some people are still waiting and watching to maintain “mine” operations; some virtual currency trading platforms can still bypass the risk control of domestic financial institutions and perform operations such as recharge, withdrawal, and purchase.
Recently, the virtual currency trading hype has rebounded. China Internet Finance Association and other related associations jointly issued an announcement to remind them to prevent the risk of virtual currency trading speculation. On May 21, the 51st meeting of the Financial Stability and Development Committee of the State Council clearly proposed to crack down on Bitcoin mining and trading.
“The next step should be to take targeted measures to carry out centralized rectification of virtual currency mining and trading activities.” Dong Ximiao, chief researcher of China Merchants Finance, suggested that, on the one hand, local governments should stop attracting investment by companies suspected of mining and cut off the increase. Comprehensive measures such as electricity prices, land, taxation, and environmental protection have been adopted to promote the orderly exit of existing mining companies. On the other hand, institutions and platforms that illegally participate in virtual currency transactions, speculation, or provide support services should be dealt with in a timely manner in conjunction with judicial departments to increase the cost of violations of laws and regulations, and increase the deterrence of rectification.
Experts say that virtual currency is by no means a “one-size-fits-all” investment product, and virtual currency transaction contracts are not protected by law. Faced with the prompts and admonitions of the relevant departments, the majority of investors should increase their risk awareness, stay away from virtual currency trading hype activities, and guard their “pockets”.
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.