Galaxy Digital believes that China’s attack has nothing to do with the removal of the carbon footprint. A set of measures against cryptocurrencies would affect both the Chinese OTC market and stable coins.
According to analysts at financial services firm Galaxy Digital, the crackdown that miners and Bitcoin trading in China are currently experiencing relates more to a desire for restrictions in the market than concerns about carbon emissions.
The company assures that the decisions made by the Financial Stability and Development Committee (FSDC) focuses on political rather than economic considerations, as they feel unable to get rid of the network.
In a report that appeared in the media just a few days ago, the US firm studied in detail the effects that the closure of bitcoin mining farms in several Chinese provinces has for the development of cryptocurrency, along with the consequent migration of miners and the drop in the hash rate.
The document describes the actions of the government entity as a meticulous strategy to end bitcoin mining and trading in the Asian nation.
Galaxy Digital talked about the recent ban that the People’s Bank of China (PBoC) applied. Since last June has prevented banks from giving services related to transactions with crypto assets.
The new regulations came with a series of anti-mining measures that began to be announced on May 21, arguing that these activities might be a threat to China’s ecological plans. In this regard, the report explains the negative consequences of the PBoC regulations on OTC (over the counter) trade.
Average Chinese citizens cannot access the cryptocurrency trading ecosystem, but the new crackdown threatens to close the remaining side doors, the writer notes, concerning the OTC market.
Trading in OTC markets is one of the highlighted options for Chinese investors. This method facilitated the exchange of China’s local currency with Tether (USDT). The stable coin could be deposited on exchanges and be useful for cryptocurrency trading.
The report states that this solution would bring positive changes, but it meets some obstruction from the new threat to close the OTC trade route.
The China effect and the Tether case
Galaxy Digital clarifies that the current crackdown in China is leaving significant traces on the Bitcoin blockchain. Particular repercussions are the slowness in the aggregation of blocks on the blockchain, which has suffered a long and unprecedented delay. Added to this is the dramatic decline in the hash rate.
About the hash rate and its decay, before the first announcements of the closure of farms, the hash rate had reached 160 Eh / s, then starting a declining behavior that hit 64 Eh / s in recent days, according to BitinfoCharts.
The analysis also explains how the Chinese crackdown could impact the security of stable coins. They cite the case of Tether, being the most popular way to access the cryptocurrency market in the Asian country.
By: Jenson Nuñez
