A crackdown by Beijing is rapidly accelerating a shift in focus by makers of machines that ‘mine’ cryptocurrencies like bitcoin from China to North America and Central Asia as Chinese clients face an uncertain future.
China’s central government vowed to clamp down on bitcoin mining and trading on Friday, causing some miners to halt all or part of their operations in a country that accounts for more than half of the world’s crypto supply.
The makers of the equipment miners use, many of them Chinese, say they are now looking elsewhere for growth.
Hangzhou-based Ebang International said that its “mining machines will still be in short supply” overseas, even if domestic sales disappear.
The impact will be further softened by the fact that “domestic customers will go overseas to mine”, it added in a statement sent to Reuters.
Illustrating the trend, Shenzhen-headquartered BIT Mining Ltd said in a statement on Monday that it had entered into a deal with a Kazakhstan-based company to jointly invest in a crypto mining data centre in the central Asian country.
Bitcoin miners use increasingly powerful, specially-designed computer equipment, known as “rigs”, to verify bitcoin transactions in a process which produces newly minted bitcoins.
The energy-hungry business is big in China, although the country’s market share had been declining for years due to regulatory uncertainty.
If China quickly loses its crypto computing power, foreign miners will benefit, Alex Ao, vice president of Innosilicon Technology, a chip-designer and crypto mining rig maker, said.
“Places like North America and Central Asia have advantages in terms of power supply and policy support,” Ao said, adding that more Chinese miners will shift abroad.
Edward Lu, senior vice president of Canaan Inc, another Chinese maker of mining machines, said it was looking at similar markets.
“The strategy should be to strenuously develop markets such as Kazakhstan, Canada, and North Europe, where energy resources are abundant and cheap, while regulations are clear and predictable,” Lu told Reuters.
‘HOSTING HOTELS’
Although China’s northern region of Inner Mongolia, a major mining centre, published draft rules on Tuesday to root out the business, other major mining centres have yet to issue their own, after last week’s salvo from a State Council committee led by Chinese Vice Premier Liu He.
“Relocating their mining operations to overseas is the miners’ only Plan B,” Winston Ma, NYU Law School adjunct professor, said, adding that only China’s biggest mining operators can make the exodus smoothly.
Kazhakstan, which clarified its crypto mining rules last year, hopes it will boost an oil-dominated economy.
“We received inquiries from three Chinese bitcoin miners on Monday about using our hosting services,” said Didar Bekbauov co-founder of Kazakhstan based Hive Mining, which provides ‘hosting hotels’ for mining machines.
Bekbauov said it appeared they were looking for an alternative after the crackdown.
Some miners are angry at having to move.
“As long as the mining business is not illegal, you should not kill the industry with just a few words from officials,” one Chinese crypto player, who declined to be identified, said.
(Reporting by Samuel Shen in Shanghai and Alun John in Hong Kong; Editing by Sumeet Chatterjee and Alexander Smith)
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
