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China’s crackdown on the cryptocurrency industry is expected to spur miners to uproot their operations and head abroad.
The exodus is seen occurring as China reins in crypto mining, trading and other services. Binance Holdings Ltd., which is the world’s biggest crypto exchange and also runs a major mining pool, is one of those noticing the difference.
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 even briefly falling below $30,000 on Tuesday after having reached nearly $65,000 in mid-April.
“China may make up less than 50% of Bitcoin mining by year-end, down from 65%,” said Dan Weiskopf, co-portfolio manager of the Amplify Transformational Data Sharing ETF, in an email interview. He added that the U.S., Canada, Sweden and Argentina were likely alternative destinations for Chinese mining operations. Amplify is an actively managed exchange-traded fund with a $1.1 billion market cap that’s composed of blockchain-related stocks, with about 20% of its portfolio in crypto miners.
The hashrate, which measures the computational power used in Bitcoin mining, has dropped by about 40% in the past couple of weeks, according to data from BTC.com.
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“The decline in hash is probably a short-term phenomenon and evidence of China miners coming offline,” Weiskopf said. “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.”
— With assistance by Tracy Alloway