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The price of Bitcoin has continued to decline, and a renewed Chinese crackdown on domestic mining activity helps explain this sharp decline.
About 400,000 miners in Xinjiang province were forced to cease operations and go out of service. This sudden disruption has cut off revenue streams, prompting some operators to sell Bitcoin funds to cover operational costs or fund migration efforts.
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Mining disruptions add pressure to Bitcoin’s decline
Canaan’s former president Jack Kong said in a recent social media post that China’s computing power dropped by about 100 exahashes per second (EH/s) in 24 hours. He explained that this drop, estimated at around 8%, came after signing hundreds of thousands of mining devices.
This news appeared not long ago Bitcoin fell to $86,000 on Tuesdaysurpassing the $90,000 level it held over the past week.
Some analysts believe that the timing of the events was not a coincidence, indicating that there is a connection between Mining stops and prices drop.
They indicate that these sudden and drastic measures often force miners to take immediate measures, adding to the short-term market pressure.
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Shutting down miners leads to liquidity pressures and sales
According to Bitcoin analyst Numilimit, when miners are forced to stop working, a chain reaction usually follows.
This includes an immediate loss of income, an urgent need for cash to cover operating expenses or relocation costs, and in some cases, Forced selling of Bitcoin shares.
This dynamic can directly extend to the broader cryptocurrency market. When about 8% of Bitcoin’s computing power is suddenly out of service, the uncertainty increases. Pressure on prices increases in the short term.
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This creates real sales pressure, not the other way around, Nomilemt explained.
Huge impact timing. China’s mining sector has only recently re-established its position as a major contributor to the global hash rate.
Mining resurgence faces sudden regulatory pressure
Less than a month ago, China regained its position as the third Bitcoin mining center in the world. The hash rate index said the country accounted for about 14% of the global hash rate as of October.
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Although the authorities imposed an official ban on mining in 2021, illegal mining activities continued to expand throughout the country.
Analysts point to access to low-cost energy and surplus electricity in some areas as key drivers behind this recovery.
In this context, the narrowness of the campaign this week surprised the miners. After the regulations were suddenly tightened and the mining power of Bitcoin decreased, the income of the miners quickly became the focus of attention.
These pressures have been exacerbated by Bitcoin’s decline of around 30% since its peak in October and transaction fees remaining persistently low, pushing miners’ revenues to recent lows.
Because mining supports the security and operation of the Bitcoin network, the recent decline in price seems to be in line with the wider unrest, although the full impact may emerge over time.
