Did China make the mistake of a lifetime by banning Bitcoin mining or do they have a secret plan? That’s the question the whole Bitcoin ecosystem is struggling to answer. And today, we got another piece of the puzzle. In the article titled “It’s Over, It’s All Over” – The Death Of China’s Bitcoin Mining Industry,” a pseudonymous manager by the name of Ye Lang tells his story. And in his tale, a bigger story is reflected.
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On May 21st, in a “meeting of the State Council’s Financial Stability and Development Committee, a top-level economic and financial policymaking body chaired by Vice Premier Liu He,” China decided to ban Bitcoin mining. Less than a month later, on June 19th, the Sichuan government ordered “the closure of Ye’s facility, along with 25 other cryptocurrency mining projects in the province.”
That story started like this:
Ye decided to jump on the Bitcoin mining bandwagon in 2018 when he closed down the majority of his internet café business, mortgaged his apartment in Anqing, Anhui province, borrowed money from relatives and left his wife and daughters to move to Sichuan
What can we learn from Ye’s first-hand experience?
1.- It Only Takes 80 Employees To Manage An 80,000 Bitcoin Miners Operation
At the peak of the facility’s Bitcoin mining operations, Ye was in charge of 80 employees and a total of 80,000 mining machines, with the entire project estimated to be earning more than 90 million yuan ($14 million) during the peak six months when Sichuan’s rivers are glutted and electricity is especially cheap
The numbers are staggering. Evidently, supersizing mining operations offers a huge advantage. Especially in regions with cheap electricity.
2.- Clean An Renewable Energy Didn’t Save Sichuan
The fact that the electricity for crypto mining in Sichuan came from clean hydropower meant that many thought the province would be a safe haven for Bitcoin miners. As pressure on local governments to cut carbon emissions mounts, projects were successfully shuttered in some other provincial-level regions — such as Xinjiang and Inner Mongolia — where the mining was chiefly fueled by coal.
The only thing we can know for sure about the Chinese government’s plan is this: the environment is not on their radar. They’re closing these mining operations for other reasons altogether.
3.- Bitcoin’s Energy Use Is Not The Issue
The fact that the Sichuan crackdown was about to hit, confirms what everyone has known: the “justification” for cracking down bitcoin miners, the cold shoulder on bitcoin by social luminaries (such as Elon Musk) and the use of the ESG bullshit excuse that crypto is “dirty” have always been merely a socially-acceptable smoke screen for a regulatory crackdown on cryptos when they become too big.
Enough said. ZeroHedge nailed it on the head.
It’s also worth noting that Nic Carter also nailed it on the head regarding China’s energy mix when it came to Bitcoin mining.
4.- Individuals Can Still Mine Bitcoin In China
Despite the government’s hardline approach, Ye is determined to carry on: “This industry is extremely volatile. High emotions and stress are involved, but that’s also its appeal. Companies are banned from mining Bitcoin, but individuals aren’t,” Ye said, adding that he plans to turn around his operation by purchasing old equipment and downsizing.
The Chinese government was only worried about industrial-sized private mining operations. The question is why. What are they planning? Nobody seems to have figured that out.
5.- One Owner Mined Between 70 and 80 Bitcoins Per Day
Another character enters the scene, the owner of the mine. We’ll call him Liu Weimin, also a pseudonym.
Liu owned more than 10 Bitcoin mining farms, which industry insiders estimated accounted for one-eighth of the total electricity consumed by all Bitcoin mines in the province.
During peak seasons, Liu said his farms could mine 70 to 80 Bitcoins every day. About 900 Bitcoins are issued each day globally, according to an industry information platform.
Almost 10% of the total daily issuance seems like too much for a single individual. The Bitcoin world scored a huge win with the Chinese ban on Bitcoin mining.
BTC price chart on Bitstamp | Source: BTC/USD on TradingView.com
6.- A Industrial-Sized Mine Can Break Even In A Year
“Mining farms are somewhat like conventional crop farms. No matter how the Bitcoin market changes, the mining process remains. Opening such facilities is a relatively stable investment, and I can generally break even in a year,” Liu told Caixin.
There are few businesses in the world that can give you that ROI. At least among the legal ones. Food for thought for the young entrepreneurs out there.
Related Reading | How China Bitcoin FUD Is Lowering The Cost To Produce BTC
7.- Bitcoin Mining Used To Be A Respected Business In China
Thanks to the Sichuan government’s mining-friendly policies back then, Liu’s business continued to flourish for the past three years. He quickly made a name for himself, and was a frequent guest at government events and meetings, where he was recognized as one of many model energy consumers who had helped lift locals out of poverty.
From a respected businessman to a social pariah. It would be easy to feel sorry for Liu if he wasn’t on his way to restore his business.
Following the government’s May 21 crackdown announcement, he arranged teams of employees to scout for new venues in North America and Kazakhstan. In mid-June, his company bought an oilfield in Canada that could potentially provide fuel for his Bitcoin mining business.
So, why did China banned Bitcoin mining? We have no idea. We know, however, that their hold over the industry was already waning and that entrepreneurs are selling small hydropower stations. And we have both Ye and Liu’s stories. Is the picture clearer? Are we closer to the real deal?
Featured Image by Лечение Наркомании from Pixabay - Charts by TradingView
