China has been a massive source of Bitcoin-related FUD for a while now. Back in 2018, it emerged that the country was cracking down on crypto. From then on, Bitcoin tanked to lows of $3000.
2021 has not been any different. At Bitcoin’s highs of $64k, it emerged that China was cracking down on Bitcoin mining. Elon Musk then added to the downside momentum by claiming that Bitcoin was not environmentally friendly. The result was a more than 40% crash in the value of Bitcoin in under a month.
The intensity of this FUD has been quite visible this week, with China closing mining operations in one of the last provinces with active mines. This has seen the price of BTC drop below $36k, and it’s trending lower.
The game is changing
While this may be a problem in the short term, the long-term fundamentals are getting stronger. For starters, Bitcoin is slowly moving away from its dependence on China. While most of the mining is done in China, other countries are taking up the mantle.
One of them is El Salvador. The country has not only made Bitcoin legal tender, but it has also embraced Bitcoin mining. The president recently announced that he had directed the country’s State-owned power company to facilitate Bitcoin mining.
This is a big deal considering that it will be done using 100% renewable energy. The move by El Salvador has several implications for Bitcoin.
The first one is that it starts the process of decentralizing Bitcoin mining from China’s stranglehold. This means that no single country will have the ability to manipulate the price by threatening miners long-term.
Secondly, Bitcoin mining is set to become more environmentally friendly. Unfortunately, the issue of the environment has become another major source of FUD for Bitcoin recently.
The move by El Salvador could encourage other countries to embrace mining as a form of revenue diversification. The direction that Bitcoin mining is taking is also quite evident in the formation of a Bitcoin Mining Council in the U.S.
The council that Michael Saylor of Microstrategy formed brings together all Bitcoin miners from North America. The goal is to help them move towards more energy-efficient Bitcoin mining.
What Bitcoin mining decentralization means long-term
Decentralized and energy-efficient Bitcoin mining is a big deal to the long-term growth of Bitcoin for a number of reasons.
Firstly, climate-conscious institutions will be more receptive to the idea of Bitcoin as an investment. Bitcoin has already experienced a surge in institutional uptake. However, the issue of the environment has been a dark cloud hanging over it. Once this clears out, Bitcoin’s institutional uptake stands to rise exponentially.
Its growing technical capabilities will also bolster the institutional uptake of Bitcoin. A few hours ago, Bitcoin miners agreed on an upgrade that would see Bitcoin gain smart contracts capabilities.
The upgrade called Taproot is a soft fork that makes Bitcoin more efficient and enables smart contract capabilities. This could effectively make it compete with Ethereum on this front. So the future keeps getting brighter for BTC.