Does the recent bitcoin mining ban in China suggest a new worldwide investment opportunity?
As demand for Bitcoin increased, competition among miners heated up — making it much harder to profit from bitcoin mining.
Prior to the recent China mining crackdown, an estimated 65%-75% of Bitcoin miners were in China. As the Chinese government cracked down on Bitcoin mining, this created more opportunities for people to mine Bitcoin and make a large chunk of cash in other parts of the world.
What is Bitcoin mining?
Without going into too much detail, Bitcoin mining is what allows transactions to happen within the Bitcoin blockchain.
In the most simple terms, miners compete by trying to solve a puzzle using different mathematical equations to complete a block on the blockchain. When the puzzle is solved and the Bitcoin transaction is completed, the miner will then get rewarded.
The reward comes from the person sending the Bitcoin as it comes off as a fee. When making any crypto transaction, the pesky fee that shows up is what pays the miners, and allows the blockchain to work.
More than 50% of the mining power has decreased since the crypto correction in May, which means that miners that are still online are finally able to have a more fair chance at winning the race to solve the puzzle.
Mining Made Easier
Fewer miners creating blocks mean that there are now slower times to complete transactions on the blockchain. On average, while China held 65%-75% of miners, the average transaction time of a Bitcoin transaction was around 10 minutes. Now, the average transaction time is at times up to 19 minutes per transaction.
This longer transaction time could lead to some folks switching to a different cryptocurrency when it comes to transactions. Litecoin, which is referred to as ‘the silver to Bitcoin’s gold, can very well be an alternative. See our coin page, Litecoin: The Silver to Bitcoin’s Gold. Litecoin is known for quicker transaction times and lower fees which is what many people will turn to when it comes to day-to-day transactions.
Does the Good Outweigh the Bad?
Although transaction times had been slow, Bitcoin self regulates every 2 weeks and will adjust to how many miners are in the space. As of this week, the estimated transaction time is back to the 10-minute mark. Mike Coyler, CEO of Foundry, explained “It is a self-regulating market that does not require any outside committee to determine what to do. This is a very powerful concept.”
The technology behind Bitcoin can sometimes be hard to grasp but the important thing to note is that it is now 28% less difficult to mine Bitcoin, which brings back mining to the everyday person.
The monopoly that China had on Bitcoin mining was unfair and made it virtually impossible for the average person with a powerful computer system to mine. This drove away miners for years but luckily, due to China shutting it down, the mining game is back to being everybody for the meantime.
What This Means For Investors
As Chinese miners are forced to pack up and move and the rest of the world’s miners become more profitable, it’s only a matter of time before they relocate and start operating again.
As the Bitcoin price rises, so do the incentive that will go to miners. As the price of Bitcoin is expected to rise in the coming weeks according to many analysts, miners who are still mining are going to be seeing a pretty penny.
Another week of sideways action for Bitcoin only means that as time goes on, the pressure is building for a potential massive move to the upside. Both miners and investors will be rewarded for their patience during these last few stressful and boring weeks in crypto.