China’s Money  and Mining Habit’s

The Chinese people have longed for sources of income that exist outside of the government-controlled Chinese banking system. The Chinese people are also excellent savers; it’s not uncommon for families to save half or more of their combined yearly salaries. Contrast that to the 40% of Americans who only had $1000 in their savings accounts in 2019 that awakened a debt crisis. This isn’t a saving issue on behalf of Americans, it’s a spending problem. Just like we saw in 2020, the American government is no stranger to this spending problem.

The Chinese also are quite open to speculative investments. So when Bitcoin started in 2009 it wasn’t long before the Chinese people started buying Bitcoin. Not to buy things like on Silk Road, but to have as a store of value. 

Back then mining was done on home computers, but in 2013 Chinese chip manufacturer Caanan, designed an Application Specific Integrated Circuit or ASIC chip that could mine Bitcoin faster than any home computer. This started a hash rate war among China’s computer chip makers that lasted up until 2021. 

In the early 2000’s nearly all computer manufacturing was done in China, so no one could touch them. AMD, Intel, and Texas Instruments still do not have an ASIC miner for any crypto. All the innovation has come from China and Hong Kong, even though the mining in China hasn’t been a state-run operation. In fact, innovation is almost entirely run by the CCP version of private companies. Some of these companies are big, but most are small.

When China’s Hydropower is running at full tilt in the summer months, the profits from mining are insane. Some Bitcoin and Ethereum mines are located inside the hydroelectric plants themselves and pay zero power. Since this is happening during increased tensions between the US and China, the US is playing chess looking to eliminate strategic Chinese assets, like banning TikTok or Huawei. China is taking large portions of the new finance sector under its control, playing Go.

Real Americans – not the ones in the government – saw this coming way back in 2010 and started their own mining operations in states that had cheap power and plentiful land to build on. Slushpool was one of the first to mine Bitcoin in America, but the going has been slow. Remember who controls all the mining equipment? China. 

When these American mining companies place orders from Bitmain or Ebang, their orders go to the bottom of the stack and Chinese miner orders are filled first. This leads to massive delays for the American miners. They also get shadowbanned from new tech; it’s not uncommon for Bitmain to design and manufacture its own new ASIC then put it’s on its own mining pool, Antpool, for months before they start selling them outside of China. Suffice to say that it’s been an uphill battle. America’s opening moves have failed to draw China out of position and has been, in spite of our government that America has stayed in the running at all.

The Great Bitcoin Mining Migration

By the end of 2020, the future of Bitcoin and even Ethereum and other proof of work mining was looking bleak. The pandemic caused chip shortages that further insulated the mining equipment inside of China. But at the same time, the CCP was putting the finishing touches on its digital currency, the digital Yuan. The CCP has been social engineering their population for submission on a grand scale ever since Xi Jinping unveiled the 12th “5 Year Plan” back in 2011. Is this digital Yuan reliable? Only time will tell.

All that was wrapping up nicely but the business side of things has been allowed to remain quasi-capitalist. That’s coming to an end. And to end it, the CCP needs to control the money supply, and Crypto is the antithesis of just that. 

So what’s a dictator to do? Well, you must ban Bitcoin and all crypto from your country. So after making dozens of threats against Bitcoin over the past five years the CCP finally decided to drop the hammer and ban bitcoin mining of crypto across the country at the end of June 2021. The hash rate for Bitcoin immediately dropped and added further price volatility to the markets. This drop in hash rate for Bitcoin as well as Ethereum, Digibyte, Zcash, and Litecoin, will have positive price effects since the supply will suddenly become more deflationary than before. 

This sudden lag in Bitcoin production could also extend the next halvening by a few weeks or even months, yet remains to be seen. That could extend this bull run as well. It depends on how fast miners can get back online. This is also perfect timing for Ethereum’s reduction in gas fees happening on July 27th. ETH will be getting burned so adding fewer block rewards to the mix could send Ethereum closer to 25k by the end of the cycle. Bitcoin could easily rise to 200k by the end of the cycle, as well. Litecoin, Zcash, and Digibyte should see higher than expected highs this cycle as well.

America’s Bitcoin Mining Break

In the game of Go and Chess, giving up ground or moving out of position is called a blunder, and I think that’s what China has done. What does this mean for Bitcoin? While the hash rate shock is overall good for the market, we’ll see a lot of volatility in the short term. Miners who can move their operations are doing so as fast as they can. Some Bitcoin miners are headed to Kazakhstan, while others are moving to Baltimore to mine Bitcoin. Not sure why, when the mayor of Miami welcomes Bitcoin miners. A couple of states over, Texas is aiming to be the next Bitcoin mining hub and your very own Bitboy met with the Texas state legislature to help educate them on Bitcoin and Crypto.

Americans see their opportunity to move their powerful pieces into position and are taking it. Blockcap just purchased 42,000 ASIC miners from Bitmain and Caanan to mine Bitcoin in America. They even have plans to buy another 12,000 by the end of the year. This seems to be a trend in America. Take the space race as an example. It took the Russians getting into space first to get America serious about its space program. This time it’s the future of finance. The stakes are different and so are the rewards.

Has China been playing GO when this is a game of Chess or has America lost its opportunity? I think we’re going to see more mining spread out, not just in the US but all over the world. Low global income countries like El Salvador are already embracing mining on a rapid scale. It is now up to the United States to innovate or get checkmated.