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Crypto bosses see miners fleeing China

As crackdown spreads.
Image: Christinne Muschi/Bloomberg

The heads of some of the world’s biggest cryptocurrency exchanges say Bitcoin miners are shifting operations out of China as authorities intensify their crackdown on the space.

“We’re seeing a lot of those miners moving out of China to other places,” Changpeng “CZ” Zhao, the CEO of Binance Holdings Ltd., the world’s biggest crypto exchange by reported turnover, said in an interview at the Qatar Economic Forum on Tuesday. “Some of them are sending their mining equipment to overseas. There’s big shipments.”

Zhao said he’s seen movement by clients in Binance’s mining pool, which combines the computing power of number-crunching machines that verify cryptocurrency transactions.

China’s moves have injected uncertainty into the cryptocurrency market and helped pull Bitcoin down to the lower end of its recent trading range, with the coin briefly falling below $30 000 on Tuesday after having reached nearly $65 000 in mid-April. The hashrate, which measures the processing power used in Bitcoin mining and is used as a proxy for mining activity, has also dropped by about 40% in the past couple of weeks, according to data from BTC.com.

While a lower hashrate is often portrayed as a negative for Bitcoin, a temporary disruption of mining power as rigs are moved out of China could also be embraced by some Bitcoin bulls who argue that a concentration of mining capacity has long been a vulnerability for an asset prized by proponents for its independence from governments and central banks.

“In the future you’ll have a different geographical distribution of hashpower,” Sam Bankman-Fried, the former Jane Street trader who now runs the crypto derivatives exchange FTX, said in an interview on Thursday. “It’s expensive to move rigs but it’s not impossible.”

The Global Times reported that multiple Bitcoin miners in China’s Sichuan province were closed on Sunday as authorities intensified their crackdown. On Tuesday, Bloomberg reported that China had summoned officials from its biggest banks to reiterate rules banning cryptocurrency services that were first issued in 2013.

China’s measures mean the country’s share of Bitcoin mining could fall from an estimated 65% to less than 50% by the end of the year, according to Dan Weiskopf, co-portfolio manager of the Amplify Transformational Data Sharing ETF, an actively-managed exchange-traded fund that’s composed of blockchain-related stocks, with about 20% of its portfolio in crypto miners.

Alternate destinations for Chinese mining operations include Russia, Kazakhstan and Texas, according to market participants. Weiskopf cited Canada, Sweden and Argentina as other possibilities.

“The decline in hash is probably a short-term phenomenon and evidence of China miners coming offline,” he said in an e-mail. “It is a net positive for North America miners who are now expanding and scheduled to have a lot of hash come online later in 2021 and into 2022.”

© 2021 Bloomberg

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