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Updates on Mining: the effects of China’s ban

Photo of: Joseph Stone
by Joseph Stone

When China announced a ban on Bitcoin mining on its territory, observers thought it was a bad sign. In reality, a reshuffling of the deck took place. The number of companies operating from China was leading the way. They had the majority of the mining power in the world. The big fear was that these companies would be forced to sell their Bitcoin stocks. And that was to balance out their shortfall. But that massive sale didn’t happen. This suggests that Chinese farms have successfully relocated their facilities.

The Chinese ban has had two consequences for global mining. First, the difficulty of mining has drastically decreased. This difficulty is determined by the number of computers and servers in the world trying to mine at the same time. So when all the Chinese servers stopped, the work became much easier for those who continued.

The second notable effect is the exodus. Mining companies are migrating. Especially to North America, which has become the new global center of mining.

For example, the IBC Group. This UAE company specializes in investment and mining. It recently moved its headquarters to Toronto. Its president Khurram Shroff said: “We believe that the Chinese crackdown is a temporary inconvenience. The diversification of the location of mining facilities is great news for the rest of the world.”

Kazakhstan has also picked up much of the mining activity. The country has two advantages for Chinese companies that have had to relocate. It borders the Middle Kingdom, which greatly reduces the logistical costs of moving. And electricity is cheaper. Two factors of choice for these companies.

Companies that specialize in mining and buying Bitcoin have seen their stock prices rise with the Chinese ban. In particular, two of the leading mining companies, Marathon and Riot, have seen their share prices rise. These have seen their share prices rise by 143% and 93% respectively following the Chinese government’s announcements. A third Western company, Bitcoin Mining Limited (BTCM), has not yet benefited from this increase and its price is still stagnant at the same level. This difference is explained by a slower migration of facilities. BTCM was mainly domiciled in Sichuan province. Now it is preparing a migration to Kazakhstan and Texas.

Another firm, Argo, is currently exploring a listing on the NASDAQ. This would follow an initial listing on the London Stock Exchange in 2018. Meanwhile, the company is building a mining farm in Texas. With a capacity of 200 Megawatts, this would complement its 35 Megawatt Canadian facility.

According to cryptocurrency specialists, when more bitcoin miners went offline as a result of China’s limitations, other miners’ portion of the network grew, possibly making mining much more profitable.