Cryptocurrency miners, including Huobi Mall and BTC.TOP, have suspended operations in China after Beijing ramped up efforts to crack down on bitcoin mining and trading, leading to the digital currency’s decline.
A State Council committee led by Vice Premier Liu He announced the efforts late Friday – the first time the council has targeted virtual currency mining, a large company in China that accounts for up to 70 percent of the world’s cryptocurrency supply.
Cryptocurrency miners use powerful and specially designed computer equipment or platforms to verify virtual currency transactions in a process that produces newly minted cryptocurrencies such as Bitcoin.
Bitcoin has been under heavy attack after the recent Chinese move and is now nearly 50% down from its all-time high. It lost as much as 17 percent on Sunday, before paring some losses and was the last steady trade in Asia.
Protecting investors and preventing money laundering is a special concern of governments and financial regulators who are grappling with whether and how to regulate the cryptocurrency industry.
US Federal Reserve Chairman Jerome Powell caused a furore over cryptocurrencies last week, saying on Thursday that they pose risks to financial stability and hinting that more regulation may be warranted.
Huobi Mall, which is part of the Huobi cryptocurrency exchange, said in a statement late Sunday that all conservation work has been suspended.
“In the meantime, we are communicating with overseas service providers, to pave the way for future mining rigs exports,” Huobi Mall said via the official Telegram community, and asked customers to “be calm and calm.”
BTC.TOP, a cryptocurrency mining group, has also announced that it is suspending its business in China, due to regulatory risks.
Founder Jiang Zhuoer said in a small blog via Weibo that in the future, BTC.TOP will mainly conduct cryptocurrency mining business in North America.
He wrote, “In the long term, nearly all Chinese mining platforms will be sold overseas, as Chinese regulators suppress mining at home.”
China has already lost its status as a global trading hub for cryptocurrencies after Beijing banned cryptocurrency exchanges in 2017.
“Ultimately, China will lose the power of encrypted computing to foreign markets as well,” Jiang said, predicting the rise of US and European mining complexes.
HashCow, another cryptocurrency mining company that owns 10 mining sites in Chinese provinces including Xinjiang and Sichuan and sells computing power to investors, said it will fully comply with government regulations.
In a statement to clients, HashCow said it would suspend purchases of new Bitcoin platforms, and promised to refund the full amount to investors who have applied for computing power but haven’t started mining yet.
Risk adjusted returns
Regardless of the sheer scale of the decline in virtual currencies last week – the Bloomberg Galaxy Crypto Index is down nearly 40 percent, the most since the pandemic turmoil in March last year – large daily price fluctuations have attracted investor attention as well.
However, RBC derivative strategist Amy Wu Silverman argued in a note on Sunday that based on a risk-adjusted return measure known as the Sharpe ratio, Bitcoin has performed better than stocks in Tesla Inc. Or the SPDR S&P 500 ETF Trust or the Invesco QQQ Chain of Trust 1.
Bitcoin, Ether, and virtual meme coins like Dogecoin are still making big gains over longer time frames, like last year – around 12,000 percent in the case of Dogecoin.
For Ben Emons, Managing Director of Global Macro Strategy at Medley Global Advisors in New York, Bitcoin is “cementing its grip on the markets through volatility, liquidity and correlation”.