The value of major cryptocurrencies—including bitcoin, ethereum, cardano and dogecoin—plummeted Monday after Beijing renewed efforts to rein in the sector and severed power to bitcoin mines in Sichuan province over the weekend, one of the country’s largest producers of the digital currency.
Bitcoin fell around 9% early on Monday morning after Chinese officials targeted bitcoin mines in the key province of Sichuan, part of a wider crackdown on the process through which computers solving complex problems consume huge amounts of electricity.
China is the source of the majority of the world’s cryptocurrency trade—a 2020 study found it to account for nearly 80% of global bitcoin operations—and Sichuan is its second most intensive mining region.
Local authorities claim the latest crackdown has cut the country’s bitcoin production by more than 90%, according to state media the Global Times.
The move seems to have precipitated a sharp decline in bitcoin’s hashrate, the computational power used to mine and process bitcoin transactions.
The fall caused bitcoin to drop to its lowest value in nearly two weeks, falling below $33,000 a token for the first time in 12 days.
Other major cryptocurrencies, which often mirror bitcoin’s movements, also fell Monday morning, with ether, cardano and dogecoin all losing between 5-6%.
The abundance of cheap electricity in China made it an ideal location to pursue energy intensive bitcoin mining. With a great deal of this energy coming from coal power stations—an incredibly dirty source of energy—the industry is at odds with China’s new climate goals. It is also a source of unease in the crypto community, most notably with Tesla billionaire Elon Musk, who brought about a market collapse when he announced the company would no longer use the asset until it cleaned up its footprint. Beyond the environmental impact driving the current crackdown—which has also seen mines closed in Inner Mongolia and Xinjiang—China is also keen to prevent cryptocurrencies from “infringing” upon financial order, prompting a ban on financial services facilitating crypto trade.
What To Watch For
The cryptocurrency market has still not recovered from when China announced its intensifying regulatory crackdown on cryptocurrencies in mid-May (an event that coincided with Musk’s environmental worries). The market’s total value, now around $1.4 trillion, is around 56% of what it was just over a month ago.