China’s Crackdown on Bitcoin Mining is now destroying Local Economies, Small Renewable Power Plants Forced to Shut Off
Don’t pour out the baby with the bathwater.
That statement applies to many contexts in life—Baby, good, bathwater, bad. Decisions without nuance often have unintended consequences and destroy even the good parts of what you are targeting.
That appears to be the story of the ban on Bitcoin mining in China.
For years, the Chinese government has had an eye on Bitcoin and crypto. In 2017, the country decided to crack down on crypto trading and ICOs. That said, Bitcoin mining continued to thrive, and China quickly shot up the leaderboard, at some point accounting for close to 80 percent of global cryptocurrency mining operations.
This year, the government decided to go for the jugular.
In June 2021, various local governments in China’s prolific mining provinces like Sichuan and Inner Mongolia decided to ban the activity. The consequences are devastating, with the bans expected to cut 90 percent of national mining activity.
Notably, the pretext for the bans is the carbon footprint of Bitcoin mining farms. Some of it is justifiable. However, many miners were mining using renewable energy and became unfortunate victims of the crackdown.
Hydropower Plants Going On Sale
The SCMP reports that fascinating items are popping up on second hand websites in China. Mining equipment has become standard on the sites as many entrepreneurs seek to liquidate their assets. However, it is not the only aspect of defunct mining operations going on sale.
There are dozens of hydroelectric plants that found themselves in limbo after the mining bans. They urgently need new customers after their primary consumer went down overnight. Some owners of these plants are trying to sell the plants before the demand for cheap electricity dies.
Websites like Xianyu are experiencing increased hydroelectric plants with capacities of around 50 MW listed. These plants are mainly in the affected provinces. Sichuan is one of the biggest casualties of power plant redundancy as it has extensive hydropower resources.
The decision to ban mining operations was fast and sweeping. Cryptocurrency mining is a massive logistical operation that has many moving parts.
There has to be a consistent power source, some maintenance engineers and technicians, and some support staff where applicable. Therefore, the bans will affect local economies where mining operations are robust. This effect will be felt in dozens of localities, especially in Northern China.
Bitcoin Mining Bans Having a Broader Effect
Banning Bitcoin mining is affecting more people than authorities would like to acknowledge. The plants in energy-rich areas had ready demand from miners and now have to evaluate their options. Some of them see selling as the only logical option because it is difficult to replace such a definitive consumer once they are gone.
The sale is an inevitable consequence of the mining bans. Authorities most likely did not intend to go after renewable power generators. However, that is the outcome of painting all Bitcoin miners with one brush.
Some plant operators will state that the listing has nothing to do with Bitcoin mining. That may be the case for one or two, but it does not take a genius to connect the dots. The surge in plant listings is a natural consequence of the ban.
Renewable energy is necessary for a sustainable future. China has the goal of going carbon-free by 2060, which is a very ambitious goal. Some plant operators would have vastly expanded their operations with the ready demand and capital they can get from Bitcoin miners.
Some will be successful in selling their plants, but others will have to contend with stunted growth. Bitcoin mining using renewable energy is not dangerous and can help grow the renewable energy sector immensely.
Sell Bitcoin Mining Equipment or Move Overseas?
Cryptocurrency miners are selling equipment like yards sell scrap metal.
In China, it is unwise to try and defy official government policy. The decision to either resell or mine overseas because defying authorities will not end well.
Selling is a tough pill to swallow. The equipment is selling for significantly less. That is natural for a market where demand suddenly disappears and supply taps open in full. Accordingly, those who can afford it are looking to relocate. China’s neighbors like Kazakhstan are an immediate destination, while others look at distant territories such as Northern Europe and the U.S. The primary attraction of the latter sites is the procedural consistency of government policy.
As part of the broader effect, mining equipment will likely see significantly less demand soon in China. Graphics card prices are on a free fall. This slump came after Sichuan stopped mining operations in the region. Notably, graphic cards are vital for miners as they help to improve the processing power of Bitcoin mining equipment.
They have a primary consumer in gaming computers, but miners have helped elevate prices in the past decade. Gamers had to contend with competition for miners, and this made prices go up. Now that mining is dying in China, prices have come crashing down.
Many cryptocurrency miners had bought the cards, including for hoarding purposes to resell down the line. Now, they will have to liquidate in case prices go down even further. Such is the commotion that has ensued following the decision to shut down this industry.
Renewable Energy and Bitcoin Mining: A Fruitful Alliance
Innovation is the unrelenting drive to break the status quo and develop anew where few have dared to go.
For now, it appears that the narrative surrounding mining and energy is negative. China is undoubtedly going with this line.
However, that status quo is not going to last long. The ascension of renewable energy Bitcoin mining is both a matter of urgency and a display of ingenuity. These industries can find a confluence of needs that works out great for both.
For decades, governments have poured billions of dollars into renewable electricity generation. However, this industry is yet to scratch the surface because of underwhelming private sector demand. This sluggish growth is because renewable energy plants are expensive to set up and don’t have ready demand in some cases.
Bitcoin mining generates an immediate monetary return for miners. They can provide the capital necessary to invest in mining plants and the immediate and consistent demand to sustain power generation.
For Bitcoin and cryptocurrency miners, it is a necessary investment. They have noticed what has happened in China and will not want such a development in their localities. The best strategy is to mine using renewable energy. This way, it is easier to justify Bitcoin’s electricity consumption, which is low-hanging fruit for those seeking to criticize the industry.
Hopefully, governments will realize the potential of this alliance and take the appropriate measures. The fact that renewable energy plants are struggling in some parts of China does not further their ambition to be carbon-free in a few decades.
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