Status: 10/15/2021 8:31 a.m.
After China has declared all transactions in connection with cryptocurrencies to be illegal, the so-called Bitcoin miners are turning their backs on the country. Meanwhile, the course is climbing towards a record high.
The miners are leaving the motherland of the crypto trend: For the first time, the United States has replaced China as the global market leader in the lucrative calculation of the digital currency Bitcoin. This is the result of the latest figures from the Center for Alternative Finance at Cambridge University.
Over a third of the output for so-called Bitcoin mining now comes from the USA, while the People’s Republic has dropped to a no longer measurable share in the statistics. With a market share of just under 4.5 percent, Germany ranks 7th worldwide.
Nationwide ban in China
A year ago, Bitcoin miners in China were responsible for around three-quarters of all Bitcoin transactions. A month ago, however, the state central bank declared illegal all activities related to trading cryptocurrencies. Offenses should be severely punished.
Mining was also banned nationwide in view of the energy shortages. New digital money is created when users make computer capacity available for the encryption and validation of transactions. For this they are paid in the respective currency. However, only the one who delivers the result first comes into play.
With the rapid triumph of Bitcoin as a financial investment and means of payment, its energy consumption rose sharply. At first, a normal PC was enough for mining. But the more miners are active and start looking for new blocks, the more difficult the arithmetic task (“hash rate”) is. This increases the computational effort – and above all the electricity demand. According to estimates by the Digiconomist platform of the Dutch economist Alex de Vries, more than 174 terawatt hours are generated annually for Bitcoin mining alone, which is roughly equivalent to the consumption of all of Poland.
Miners are fleeing to countries with low electricity prices
Beijing had raided crypto miners back in the spring. As a result, the miners began to flee from China en masse and made their way to the cheapest energy sources in the world. “The whole narrative that China controls Bitcoin is now completely obsolete,” Boaz Sobrado, a London-based fintech data analyst, told CNBC.
The US met many requirements for Bitcoin miners looking for a new home. In states like Texas, for example, energy prices are very low in a global comparison. “This is a huge incentive for the miners competing in an industry with low profit margins.” The USA is also rich in renewable energy sources.
After the announced end of Bitcoin mining in China, many miners also migrated to neighboring Kazakhstan, which now has a market share of 18.1 percent. In third place is Russia (11.2 percent), ahead of Canada (9.6 percent), Ireland (4.7), Malaysia (4.6) and Germany. Although electricity prices in Germany are comparatively high, Bitcoin mining is worthwhile if a coin is as expensive as it is at the moment.
Bitcoin is on the rise again
Earlier in the week, the currency rose to $ 57,868, its highest level since May. Most recently, according to Coinmarketcap.com, it moved towards its record high and stood at just under $ 60,000. For comparison: in mid-July, the price was around $ 31,000. Since the beginning of the month alone, Bitcoin has gained more than 30 percent in value.
According to observers, inflation in particular is currently likely to give the cyber motto a boost. “If the price pressure remains increased in the medium term and central banks do not react appropriately, the Bitcoin exchange rate should benefit from this,” writes DZ bank expert Sören Hettler in a comment. Many investors see the cryptocurrency as a protective shield against excessive inflation in the traditional currencies of the euro or dollar.
Analyst Timo Emden from Emden Research also referred to the latest statements from the ranks of the US Federal Reserve and the country’s stock exchange regulator. Both institutions have made it clear that digital currencies like Bitcoin should not be banned. With a view to the latest price gains, Emden assumes that investors have “largely ticked off” regulatory concerns in China. Consumer advocates generally warn against investing in cryptocurrencies because of the strongly fluctuating exchange rates.