Contrary to traditional theories to explain the current rally in the price of Bitcoin, they propose an explanation related to the crackdown in China. It is about the lack of supplies that the cryptocurrency experiences after some actions by the government of the Asian country against exchange accounts.
In China, trading with cryptocurrencies is prohibited, the accounts of the redeemers have been closed. If one takes into account that, in that country, there is 65% of the global hash power of Bitcoin, it can almost naturally be concluded that, if the supply of Bitcoin is limited, its price shoots up.
This conclusion is reached by the Singapore-based firm QCP Capital, quoted by the CoinDesk news portal. Chinese Bitcoin miners need the local currency, the Yuan, to pay their operating expenses, for example, electricity bills, but obtaining them through cryptocurrency is illegal.
Account closings and the current Bitcoin rally
To get an idea of how this situation is affecting the production of the main cryptocurrency, some cases are reported. The blogger Wu Blockchain, in his account at Twitter, highlights some examples of farms that have ceased their activities due to inability to access yuan to pay their expenses.
There is a large number of “stagnant” bitcoins, which has created a shortage in market supply, giving way to the current Bitcoin rally. «74% of the miners surveyed say they face problems when it comes to covering their electricity costs“Says Wu.
It also highlights that a good percentage of virtual farmers have had to turn off their machines for up to a month due to this problem. In this way, it would be in a situation in which the providers of yuan in exchange for Bitcoin are being sanctioned and their accounts closed by the Chinese government.
«Some OTC companies have also suffered repression and have had to cease their activities», He underlines.
Faced with short supply, price increase
Accessing yuan to pay operating expenses has become a great challenge for miners in China. To do this, it must turn to an even more clandestine market, where the price of Bitcoin is traded in figures much higher than the real price of this cryptocurrency.
In a situation that affects 65% of the world’s miners, the result is that the current price of Bitcoin enters a rally. «The lack of supply has contributed extremely well to the trend of this rebound, without any of the large sell-offs typical of mining activity of the past.», Confirms QCP Capital.
Last June, the government began freezing the bank accounts of miners and exchange firms. From that moment on, the miners’ problems began to worsen.
«Miners were selling large amounts of Bitcoin in early September through exchanges. However, this had a hasty end after the repression and the arrest of those in charge of the exchange platforms», Concludes QCP Capital.
Data to take into consideration
- Unlike the most common assumptions to explain the current Bitcoin rally, there are theories that place its origin in China.
- The freezing of accounts and the imprisonment of exchange managers has cut the supply chain of coins.
- In this way, the miners have had great problems when it comes to obtaining yuan to cover operating expenses.
- The lack of supply in a country with 65% of the total hash, directly impacts the price of Bitcoin, which has generated the current rally.