China has such a large part of the Bitcoin market that anything that happens there has an effect on bitcoin.
In recent weeks, the People’s Bank of China and various Chinese Bitcoin exchanges have played a tense game of back and forth negotiations, leading two exchanges to suspend Bitcoin withdrawals and causing the price of Bitcoin to plummet around the world. The Chinese government is interested in regulating the exchanges and keeping tighter control over information about customers and transactions. While this interplay is far from resolved, it is important to note as well that China is a major player in the Bitcoin market, and particularly when it comes to Bitcoin mining. What does this mean for the ongoing negotiations between Chinese exchanges and the Chinese government, as well as for the global Bitcoin market?
Mining Centers Flourish in and Around China
A report in the Washington Post in the fall of 2016 indicated that Chinese Bitcoin mines were popping up in Tibet, a perhaps unlikely destination. Mines require massive computer processing resources which are used to record and document all transactions. The process of mining itself requires that those computer processing plants address complicated mathematical problems in order to earn Bitcoins; the process of “mining” therefore addresses certain mathematical and programming issues while serving to introduce new currency into the global circulation.
So why would Tibet be such a hotbed of new Bitcoin mining activity? On one hand, Tibet is an extremely remote and seemingly unlikely place for such operations. On the other hand, though, China has traditionally set up a vast array of traditional mining operations in and around its western region. When the mining operations turned virtual thanks to cryptocurrencies like Bitcoin, Chinese entrepreneurs recognized that hydropower necessary to keep processing plants in operation was cheap, as was local labor.
Shifting Nature of Bitcoin
The wider world first noticed Bitcoin in connection with illicit markets like Silk Road, but the cryptocurrency has gradually eased into the mainstream. This has given rise to a new group of Bitcoin investors and miners: people with a knack for banking and investment who are treating Bitcoin as a new type of opportunity, rather than as a means of opposing the traditional system. As such, people interested in setting up mining operations are looking to areas that make the most business sense to do so, and China offers many such locations. As of late 2016, Chinese mines accounted for about 70% of all Bitcoin processing power, matching the Chinese share of the global Bitcoin exchange as well. Of course, this could change quickly if the Chinese government cracks down further on Bitcoin mining and exchanges in its country. For the time being, though China seems to be an increasingly important player in the world of Bitcoin mining and trading.