Bitcoin, the world’s biggest cryptocurrency has lost more than 20 per cent in the last six days due to China’s clamp down on mining and trading, as part of a campaign to control financial risks.
On Tuesday, Bitcoin fell below $30,000 for the first time since January. The crypto slumped over 7 per cent to $29,332, its lowest since January 27.
According to Reuters, Bitcoin tumbled over 10 per cent on Monday, its largest one-day drop in over a month, with losses of nearly 30 per cent in the last week alone almost wiping out gains for the year-to-date. It was last down 6.7 per cent at $29,560.
This drop was sparked by the People’s Bank of China (PBOC) which urged China’s largest banks and trading firms to crack down harder on cryptocurrency trading.
Crypto exchanges were effectively pushed out of China by a 2017 rule change, but over-the-counter (OTC) platforms based overseas have sprung up to receive payment from people based in China and buying cryptocurrencies on their behalf.
In a statement by PBOC, Bobby Lee, chief of cryptocurrency wallet app Ballet and formerly CEO of BTC China, China’s first bitcoin exchange said, “It basically says now OTC transactions are not legitimate … we are not allowed by the banks to transfer money for cryptocurrency purchases and sales.”
Bitcoin has dropped more than half since its peak at April, from $65,000.
China has been a haven to more than half the world’s bitcoin miners, but now with the severe crackdown on bitcoin mining, setting off ‘the great mining migration’, a term used in crypto circles.
According to Arthur Lee, CEO of SAI, a bitcoin and computing company, bitcoin miners have been able to thrive in China because of its cheap electricity, availability of land, affordable labour and safety.
Most of the bitcoin miners are considering moving their operations to Texas, thanks to its abundance of solar and wind power, its unregulated market, and its crypto-friendly political stance. Others plan to migrate to countries in Central Asia like Kyrgyzstan.
What prompted miners to switch to green energy is due to Elon Musk’s tweet to consider accepting bitcoins if miners reduce their energy consumption and the Chinese government’s restriction on mining and trading cryptocurrency.
Musk’s tweet has led to a slump in the currency’s value.