The recent crackdown on cryptocurrency mining in China has boosted trading prices of almost all major cryptocurrencies like Bitcoin, Ethereum, etc. Concerns have been raised as to whether the Chinese crackdown will have a long-term negative impact on these coins. However, as of today, the prices of popular coins do not appear to be falling sharply, but rather rising. But this apparent stability cannot be taken as guaranteed. Because when it comes to cryptocurrency prices, uncertainties and massive drops have become the norm.
So what if China or other countries push the crackdown on crypto mining activities? Or what if China bans crypto mining altogether? Experts believe that even the toughest Chinese crackdown on crypto mining could have long-term positive effects on Bitcoin. However, there could be some impact on cryptocurrency trading in the near future.
Prof Tushar Jaruhar, finance faculty at Jagdish Sheth School of Management (JAGSOM), said the Chinese government recently launched eYuan and gave it 500,000 people to try. They don’t want Bitcoin to undermine their authority and control.
However, according to Professor Jaruhar, this will not stop people in other countries from mining Bitcoin as there is a significant number of people who believe in this cryptocurrency.
“Crypto investors are aware of how China works and most investors would have expected the uncertainty due to Chinese politics. So there will be an impact because finance and risk are linked, but it is expected not to be significant. There are concerns about energy consumption when mining bitcoins, but it is not clear if this will be a major reason for making crypto less attractive,” Prof Jaruhar told FE Online.
ALSO READ | Should cryptocurrencies like Bitcoin, Dogecoin, Shiba Inu be part of your portfolio? experts speak
BitBns CEO Gaurav Dahake believes mining operations would be further decentralized and Bitcoin’s anti-fragility would be put to the test if more crackdowns occur. No government, single institution or organization can take control of the Bitcoin network.
“The impact will be a short-term impact and investors don’t have to worry about the drop. Most other crypto assets are proof of stake and not proof of work. Proof of Work is what powers the Bitcoin network and we are seeing cleaner energy sources increasingly being used for Bitcoin mining. So I don’t think that would make Bitcoin any less attractive to investors,” he said.
Short term effects
Abhay Chebbi, a pro-chancellor at Alliance University and finance expert, says there will be a scramble to relocate mining bases. Poorer governments will happily welcome mining onto their soil in hopes that they can earn a share of the revenue from bitcoin trading and benefit from mining’s help integrated into IT infrastructure to attract IT jobs in the future .
“In the short to medium term, the value of bitcoin will stabilize as the cryptocurrency world finds new bases for mining and adjusts to the new amount of cryptocurrencies being mined (likely less than pre-raid levels). However, Bitcoin’s long-term future will not depend on the current Chinese crackdown. Bitcoin supporters have a libertarian worldview in which money is protected from the prying eyes of governments and their central banks. Cryptocurrency supporters will therefore not be put off by the temporary setback. They will continue to swear by Bitcoin and other cryptocurrencies for philosophical reasons,” Chebbi said.
Avinash Shekhar, co-CEO of ZebPay, also believes that the effects of China’s crackdown on crypto mining will only be temporary. “China used to do a significant amount of mining, and with this Chinese approach, mining is moving to friendlier countries. The current crackdown has reduced activity and directly impacted markets. However, this is a temporary situation where a nation’s crackdown will not affect the market in the long run. This is a knee-jerk response and we will have more fundamental strength in this area that will lead to sustained growth going forward.”
Impact on Indian Investors
Sekhar said there would not be a major impact on Indian investors. “Each country has its own demand and supply for an underlying asset and the Chinese approach does not make a direct link to investment behavior in India. Investment behavior is inspired based on asset fundamentals such as utility, acceptance (in the world), price, development, transparency, etc. It can be easily compared to a social media ban in China not leading to a decline in utility among Indian users of the same platform.”
However, Chebbi believes Indian crypto investors will be just as affected as global investors. “Immediately after the news of the Chinese crackdown, bitcoin’s value took a hit and now it appears to have regained some of the lost value. However, there is bound to be a newfound nervousness about buying bitcoin in the future, amid fears that other governments may also crack down on bitcoin mining,” he said.
(The cryptocurrency suggestions/recommendations in this story are provided by the respective commenter. Financial Express Online takes no responsibility for their advice. Please consult your financial advisor before trading/investing in cryptocurrencies.)
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers
Comments are closed.