The bitcoin (BTC) price saw a historic correction over the past two weeks. BTC dropped by 50%, pushing the price back to $30.000. Looking back, a couple of events were likely to have caused widespread panic on the market. In this article, you will read what these events were and why they’re actually not as bad as they may sound.
What is the FUD about?
Three events caused panic in the past couple of weeks. Firstly, Tesla CEO Elon Musk decided that the company will no longer accept bitcoin as a payment method for their cars. Tesla’s decision was made based on worries surrounding the energy consumption of bitcoin mining. Tesla’s mission is to accelerate the transition to renewable energy sources, and thus the decision is in that sense a logical one. However, it is still surprising as Tesla must have known this before they started accepting bitcoin as a payment method. Therefore, it looks like the decision was part of a marketing strategy.
The second news item that caused panic was China banning cryptocurrencies, again. China namely already had a ban on initial coin offerings (ICOs) and exchanges in place. Reuters, however, published an article with the headline: “China bans financial, payment institutions from cryptocurrency business.” Many prominent figures in the crypto space called the article pure fear, uncertainty, and doubt (FUD), pointing out that China already had such a ban in place and that the authorities likely only emphasized this ban.
Lastly, another article from China caused panic. This one hit a lot closer to home as Reuters published the article “China vows to crack down on bitcoin mining, trading activities.” Together with a chain reaction of liquidations of bitcoin derivatives, this FUD caused the historical price dump of 50%. But looking back, is it really as bad as it sounds?
Is it really that bad?
Musk’s worries about the emissions of the Bitcoin network were received with a lot of annoyance by the community, and rightly so. Bitcoin miners already use many renewable energy sources, and the trend suggests that this will only improve in the coming years. The media portrayed Bitcoin as a waste of energy only using oil and coals, but that is not true. Right now, 39% of all power used comes from renewable energy sources. On top of that, at least 76% of the miners have renewable energy sources already in their energy mix.
What energy a bitcoin miner uses, of course, depends on their location. Looking at the same Coindesk report, we see that especially miners in the Asia-Pacific region use a lot of electricity generated by coal plants. That China cracks down on bitcoin miners might not be unsurprising for that reason. Insiders suggest that the ban on bitcoin mining in China won’t be a blanket ban, however. It will most likely be only a ban on crypto mining with coal-generated electricity.
In that sense, a ban on crypto mining in China would be positive as it further ‘greenifies’ the image of Bitcoin. But another aspect to take into account is the fact that China produces about 65% of the Bitcoin hash rate. So a partial, or even a blanket ban would be positive for the Bitcoin network as a whole, leading to a higher degree of decentralization. In addition, it will give bitcoin miners in Europe, the USA, and other parts of the world a better chance to start mining bitcoin.
A great opportunity
With the hash rate likely dropping in the coming months, it may be a great opportunity for smaller miners to start mining bitcoin. As the hash rate drops, the difficulty will drop as well. This is an automatic mechanism to ensure that there is enough miners mining bitcoin to secure the network. A lower difficulty means it will be easier to mine bitcoins! Check out the Bitcoin ASIC miners in our web store to prepare yourself for this emerging opportunity.