Welcome back again every one to Chasing Bitcoin! It was a shaky week for Bitcoin and the crypto market as a whole as Fed news of quantitative tightening (QT), the opposite of quantitative easing (QE), sent risk-assets in a selling frenzy. The Fed announcement caused BTC to drop over 10% in the seven days before writing.
We are nearing the present in our telling of the Bitcoin story. The good news is that some of the most electrifying events in Bitcoin’s history have happened in the last 12 months! In our latest post, we discussed how the third Bitcoin halving led major corporations like PayPal, Microstrategy, and Tesla to support the world’s foremost cryptocurrency. In this post, we’ll consider how the Chinese government once again tried to slow Bitcoin’s momentum.
In April of 2021, China accounted for nearly 50% of the global Bitcoin mining. A month later, the Republic announced that it would crack down on mining the cryptocurrency to curb financial risks to investors. Skeptics argue that this had more to do with decreasing competition for their upcoming central bank digital currency, the digital yuan, and less to do with investor protection.
Nonetheless, the crackdown sent the price of Bitcoin tumbling over 50% from its April high of $64,000 to under $30,000 by July. Miners in all regions of China had to move their production elsewhere or throw in the towel on mining altogether and sell their rigs for scrap metal. Global hashrate fell by 50%. By the end of 2021, there was effectively no mining in China, and the United States had become the leader in global hashrate share. Ultimately, the ban on mining in China was positive for crypto as mining is now more decentralized.
Amid the FUD caused by the Chinese mining ban, a sliver of hope was cast out from Central America. On June 8, 2021, the Legislative Assembly of El Salvador approved Ley Bitcoin, or the Bitcoin law, officially making Bitcoin legal tender in El Salvador. Approval of this legislation meant that all businesses in El Salvador had to accept BTC for payment. El Salvador has also been buying Bitcoin for its treasury. By October, they had acquired over $60 million in BTC.
El Salvador adopting Bitcoin as legal tender is a progressive albeit ironic development in an asset pioneered by anti-government anarchists. Nevertheless, it is one of the most exciting happenings in Bitcoin’s history and should serve to make us excited about the asset’s future!
