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Bitcoin sank to a two-week low Monday on reports that China has intensified its crackdown on cryptocurrency mining.
The world’s largest digital currency fell as little as $31,760 Monday morning, dropping below $32,000 for the primary time since June 8, in accordance with data from Coin Metrics. It was trading at $32,472 at 4:00 p.m. ET, down 8% on the day. Smaller rivals like ether and XRP also fell 12%.
Many bitcoin mines in Sichuan were shuttered Sunday after authorities within the southwestern Chinese province ordered a halt to crypto mining, in accordance with a report from the Communist Party-backed newspaper Global Times. More than 90% of China’s bitcoin mining capability is estimated to be shut down, the paper said.
Bloomberg and Reuters also reported on the move from Sichuan authorities. It follows similar developments in China’s Inner Mongolia and Yunnan regions, in addition to calls from Beijing to stamp out crypto mining amid worries over its massive energy consumption.
Separately, the People’s Bank of China said Monday it had urged Alipay, the payments service run by Alibaba affiliate Ant Group, and a few major banks to crack down on crypto trading. China has already banned financial institutions from providing crypto-related services.
“China often does this,” Charles Hayter, CEO of crypto data firm CryptoCompare, told CNBC via email.
“When China sneezes, bitcoin catches a chilly. But this flexing of regulatory muscle is commonly just that — prior to now eight years, this story has risen its head at the least thrice.”
China’s crackdown appears to have led to a big decline in bitcoin’s hash rate — or processing power — which has fallen sharply within the last month, in accordance with data from Blockchain.com. An estimated 65% of world bitcoin mining is completed in China.
Bitcoin’s network is decentralized, meaning it doesn’t have any central party or middleman to approve transactions or generate latest coins. Instead, the blockchain is maintained by so-called miners who race to resolve complex math puzzles using purpose-built computers to validate transactions. Whoever wins that race is rewarded with bitcoin.
This power-intensive process has led to growing concerns over the potential environmental harm of bitcoin, with everyone from Tesla CEO Elon Musk to U.S. Treasury Secretary Janet Yellen raising the alarm. China, where most bitcoin mining is concentrated, relies heavily on coal power. Last month, a coal mine within the Xinjiang region flooded and shut down, taking nearly 1 / 4 of bitcoin’s hash rate offline.
However, miners in China often migrate to places like Sichuan, that are wealthy in hydropower, within the rainy season. And some industry efforts have been launched — including the Bitcoin Mining Council and the Crypto Climate Accord — in an effort to cut back cryptocurrencies’ carbon footprint.
— CNBC’s Tanaya Macheel contributed reporting
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