Despite the prolonged duration of this process, even the most vocal critics of the cryptocurrency market have begun to participate, especially during the 'crypto winter'. However, 2024 has emerged as the year of institutional adoption of cryptocurrencies.
This trend has been particularly pronounced and widespread in the case of Bitcoin (BTC), especially following the approval of the first-ever spot BTC exchange-traded funds (ETFs) in the United States.
These financial products have garnered significant attention from institutional investors in recent months, attracting participants from various backgrounds.
One notable exception to this trend, which has potentially hindered its ability to catch up, is China. In 2021, the Chinese government imposed a ban on BTC mining within its borders, causing substantial damage to the once-thriving industry.
This ban swiftly decimated the Chinese Bitcoin mining sector, which had already been losing global market share between 2019 and 2021. At one point in 2021, data from the Cambridge Bitcoin Electricity Consumption Index (CBECI) showed that China's mining market share had plummeted to 0%.
Although this figure has somewhat rebounded due to underground operations in China, reaching around 21%, it still represents a significant decline from the pre-ban mining market share of 46%.
It's doubtful that China can catch up
Finally, considering the current mainstream validation of Bitcoin, the Chinese government would probably find it difficult to regain momentum even if it decides in 2024 that its choice was incorrect.
April 2024 saw the most recent halving of Bitcoin, which is one of the main causes of the anticipated problems. Since then, the difficulty of obtaining the coin has doubled, as JPMorgan (NYSE: JPM) recently revised the estimate of $45,000 as the cost of mining one Bitcoin.
The stock prices of significant Bitcoin miners, such as Marathon Digital (NASDAQ: MARA) and Riot Platforms (NASDAQ: RIOT), have fallen since the beginning of the year, despite the cryptocurrency market experiencing a significant and widespread rally. This suggests that there are concerns about the increased mining difficulty.
However, given that Bitcoin reached new all-time highs (ATH) in March and February when it was denominated in yuan, as well as other significant indicators like hashrate reaching their ATH, it seems plausible that China may attempt to lift the ban.
Why China might not consider the ban to be an error
In the realm of possibilities, recent trends might compel the Chinese government to reconsider its ban on cryptocurrencies, but such a reassessment is by no means assured, as some of the key concerns that prompted the decision remain relevant.
Despite Bitcoin exhibiting relatively low volatility in recent years compared to typical crypto market standards, it's questionable whether this stability has adequately addressed the original concern of maintaining financial stability. China's apprehension about the possibility of Bitcoin collapsing to $0 was reiterated as recently as 2022, shortly after the onset of the 'crypto winter' in May of the same year.
Similarly, although China has made efforts to increase its reliance on renewable energy sources, with the supply share rising by only about 2% from 27.73% in 2021 to 29.14% in 2023, it's doubtful that significant changes have occurred regarding the environmental argument.
Furthermore, concerns over capital flight, which were a primary justification for the ban, may have only intensified given the global economy's heightened exposure to crypto markets and increased rates of cryptocurrency adoption.
However, there have been some indications in China suggesting a potentially softer stance on cryptocurrencies. For instance, a conference held in Nanjing in late April saw several scholars concur on the necessity of granting digital assets a more defined legal status in the country.
May 2024, Cryptoniteuae