China’s offensive against cryptocurrencies, led by bitcoin, has had the effect of pushing prices down. At the microphone of Sputnik, Philippe Herlin, economist and specialist in bitcoin, however, says he is “very optimistic” on the future of the dean of cryptos and even believes that the Chinese reaction only reinforces its status.
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China has declared war on bitcoin. Living a tumultuous relationship for years with cryptocurrencies, including obviously with the most famous of them, the Middle Empire has been on the offensive for several weeks. After banning financial institutions, banks and payment companies from using cryptocurrencies, Beijing is now attacking mining farms located on its soil.
As a reminder, these are buildings housing powerful computers and computer servers performing the complex calculations that allow bitcoin transactions to be recorded on the blockchain. Like Elon Musk, boss of Tesla and Space X, the Chinese Communist Party is concerned about the environmental impact of mining farms that use a considerable amount of electricity. A recent study by Deutsche Bank estimates it at the level of annual consumption in Switzerland.
China in control
But the ecological variable is far from alone in the equation. “Cryptocurrency transactions and speculation disrupt the economic and financial order, increase the risk of criminal activities such as cross-border asset transfers and money laundering”, said the Chinese Central Bank.
At the microphone of Sputnik, Philippe Herlin, bitcoin specialist and economist who has never hidden his liberalism, ensures that Beijing’s attitude demonstrates what the doyenne of cryptocurrencies embodies: “freedom”. According to him, China, which “Hesitated”, decided to lean clearly towards the “Social control” against bitcoin.
“If bitcoin does not allow you to make completely anonymous transactions, it is still more so than with a traditional bank card. In addition, it makes it possible to make transfers abroad and therefore bypass the exchange controls put in place by Beijing, ”he explains.
He recalls that the yuan is pegged to the dollar before continuing his analysis: “It is therefore important for the Chinese Central Bank that as few transactions as possible escape it so as to control this anchoring of the price of the currency with the greenback.”
A “currency that embodies freedom”
The author of I buy bitcoin (Ed. Eyrolles) therefore explains the Chinese offensive on bitcoin by the fear that the latter could call into question the exchange controls so dear to Beijing. He also notes China’s willingness to set up a cryptoyuan, which would only increase existing social control within the Middle Empire.
“This would drastically reduce the circulation of cash and the Chinese government would therefore be able to know almost all of the expenses of its citizens,” says Philippe Herlin.
According to the expert, the authorities can tolerate that the Chinese own a little bitcoins as an investment, but do not want them to use it as a transaction currency.
“Bitcoin is reinforced in its role as a currency that embodies freedom and autonomy. In this sense, what China is doing is therefore good news for this crypto, ”he said.
Same story with Brand Arvanaghi, former cryptocurrency exchange engineer and quoted by the site Cointribune. He believes that cryptocurrencies «font shiver “ nations like China.
What is China playing with #Bitcoin?
While Beijing has just announced measures against mining, officially for “ecological” questions, the regime actually wants to regain control of a sector that could escape it …@LEXPRESS ⬇️ https://t.co/RQGhACqCVH
– Raphaël Bloch (@Raph_Bloch) June 24, 2021
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According to him, bitcoin is far from buried. He goes even further by stating that it is neither more nor less than “The greatest store of value in the history of planet Earth.” Strong words which do not shock Philippe Herlin:
“We can consider that bitcoin will overtake gold,” said the economist.
He recalls, however, that the market for the famous cryptocurrency weighs about a tenth of that of gold, which he estimates at “10,000 billion dollars”. Spent a time above $ 1,000 billion, the bitcoin market suffered from the fall in its prices. This June 25, it exceeds “only” the 600 billion dollars, according to the specialized site Cryptoast.
“Crazy” monetary impressions
But the economist solicited by Sputnik notes a significant advantage of cryptocurrency over the yellow metal: its ease of movement.
“Gold is complicated to move, because it is time consuming and expensive and the certificates that are traded on the markets and are supposed to prove the holding of a given quantity of gold remains paper”, underlines the expert .
Philippe Herlin believes that the intangible status of bitcoin makes it easy to transfer it: “That makes it more efficient than gold. Especially since the fact that the units will never exceed 21 million makes it impossible to print money just like gold, of which only limited quantities are found each year. “
“It is the opposite of central banks, whose monetary impressions are delusional. Bitcoin is therefore a store of value in the same way as gold, but it is an easier means of payment to use, ”he continues.
In the meantime, China’s attitude towards bitcoin continues to shake up the market. Beijing has just suspended mining in Sichuan (southwest), which until now was at the forefront in this area, due in particular to the low cost of electricity. Other similar decisions were taken and affected several regions of the Middle Empire.
Result? Many minors already have or wish to leave China for other more welcoming countries, such as Kazakhstan. This is notably what the Chinese firm BIT Mining, which is listed on the United States stock exchange, has done. It announced on June 21 that it had transferred 320 machines to Kazakhstan from Sichuan. It plans to ship 2,600 more in the near future.
Bitcoin mining, a geopolitical issue
But another country is lying in wait to welcome the rejected Chinese minors: the United States. The governor of Texas has already said he is in favor of mining activities. Asked by theAFP, Nic Carter, of the American venture capital fund Castle Island Ventures, assured that “The miners will take this into account.” “The main danger for them is not so much the price of electricity as the political risk”, he adds.
Philippe Herlin notes that the interest in Texas is clear: recovering an industry with all the economic activity that it generates. But he sees more generally a geopolitical will on the part of the United States:
“They are now a significantly smaller mining land than China. This does not correspond to the status of the first economic power of the United States. ”
Could Washington therefore take advantage of the flight of minors observed in China to rebalance the balance? This is the analysis proposed by Philippe Herlin, who thinks that the displayed desire of the United States to practice more ecological mining serves as a pretext for their real objective: to get their hands on a significant part of international mining.
“Americans are aware that bitcoin will become more and more important in the future,” he said.
He recalls that at the time of the gold standard, the countries which had a lot of it were powerful countries. “The United States wants to replicate this with bitcoin. They are already taking advantage of the fact that many institutional and individual holders of bitcoin are Americans. Having a large part of the mining operations on their soil would only strengthen their status as an economic superpower ”, he continues.
Excellent formula: “We will start to assess our wealth in terms of #Bitcoin, and volatility is the tax we pay to be on the safe side of this trade. ” (Brandon Arvanaghi) https://t.co/EgqmgosL6A
– Philippe Herlin (@philippeherlin) June 24, 2021
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When we know that the Global Times estimates that 90% of Chinese mining capacities are now at a standstill, we say to ourselves that the United States has a card to play. For now, Nic Carter predicts a year in slow motion due to relocations: “The transactions are going to be done more slowly, probably for a few months.”
This June 25 at 3:02 p.m., the price of Bitcoin reached $ 33,037, a decrease of 2.89% over 24 hours, according to Cryptoast. We are a long way from the record of over $ 60,000 recorded in April. But for Philippe Herlin, his current bad form is only temporary. He said to himself “Very optimistic” for the future of cryptocurrency and considers that the relative low price should encourage buying.
“We are only at the beginning of the story. The price of bitcoin is very volatile and when you buy it, you have to set a horizon of three or four years, ”concludes the economist.
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