Why did China’s efforts to end Bitcoin fail?

Bitcoin (BTC) has survived the largest coordinated attack ever seen in recent months. China has completely banned crypto mining in most regions and gave miners two weeks. As a result, the hash rate dropped by 50 percent, making it the biggest difficulty correction ever.

Market sentiment regarding Bitcoin was already undermined by the then Tesla CEO Elon Musk announcing the suspension of Bitcoin payments due to the harmful effects of mining on the environment. It is not yet known whether China’s mining ban decision was affected by Musk’s statements, but it is clear that both events had an extremely negative effect.

A few weeks later, on June 16, China began censoring results for cryptocurrency exchanges in search engines. On the other hand, derivatives exchange Huobi has begun restricting leveraged transactions and blocking new users from China.

Finally, the People’s Bank of China (PBoC) ordered banks to close the accounts of over-the-counter platforms associated with cryptocurrencies on June 21, and even the social media accounts of these platforms were blocked. Over-the-counter platforms act as a bridge between fiat and cryptocurrencies in the region, meaning that without these platforms, converting between Bitcoin and stablecoins is quite difficult.

Analysts describe China’s attacks as nothing more than senseless FUD (fear, uncertainty and anxiety). Although the attacks led to a drop in the price of Bitcoin in the short term, they ultimately failed and there are three main reasons for this.

Hash rate increased to 100 EH/s

The Bitcoin hash rate, which reached an all-time high of 186 EH/s on May 12, then began to decline under the influence of China. The hash rate fell to 85 EH/s, the lowest level in the last two years, when it was at its lowest.

Estimated hash rate of bitcoin. Source: Blockchain.com

As can be seen in the chart above, with miners moving to countries such as Kazakhstan, Canada, and the USA, the Bitcoin hash rate rose again to 100 EH/s in just three weeks.

P2P markets continued to exist

Although companies involved in crypto transactions were banned in China, individuals continued to undertake the role of intermediary. According to Huobi’s own ranking system data, over 10 thousand successful P2P transactions were made.

Huobi Global’s p2p marketplace. Source: Huobi

Both Huobi and Binance offer similar marketplaces where users can trade multiple cryptocurrencies, including Tether (USDT). Once the fiat currency is converted to stablecoin, it is possible to trade on the regular or derivatives exchange.

Asian-based exchanges still lead in spot volume

It is expected that the pressure exerted by China on the trading of cryptocurrencies will reflect on the stock exchanges that were formerly headquartered in this region. However, the latest volume data from exchanges such as Binance, OKEx and Huobi show that there is no significant impact.

Weekly spot volume. Source: Cryptorank.io

Note that the three Asian-based exchanges are still leading. The trading volume of exchanges such as Coinbase, Kraken and Bitfinex is not even close to these exchanges.

While China’s pressure on Bitcoin mining and trading has had a temporary effect on BTC, both the network and the price of the coin have recovered much better than expected.

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