A former member of the CPPCC (Chinese People’s Political Consultative Conference) got fired by touching Beijing’s nerve. Xiao Yi, a former advisory member of CCP has been expelled from the party in what appears to be the first full-blown sanction of an official that violated Beijing’s stance against cryptocurrency mining.
Per the translated version of the Central Commission for Discipline Inspection (CCDI) report, the sanctioned official was accused of many crimes ranging from abuse of power to illegal monetary transactions and mining digital currencies without recourse to the environmental damage it may have caused.
“[Xiao Yi] violated the new development concept, abused power to introduce and support enterprises to engage in virtual currency “mining” activities that do not meet the requirements of the national industrial policy,” the CCDI report reads.
China implemented its zero-tolerance policy for Bitcoin mining with a series of crackdowns on miners that finally led to the exodus of mining firms from the Asian nation. Beijing’s negative stance about crypto miners is fueled by the supposed environmental impact as the majority of the nation’s power source comes from coal.
With the Chinese Communist Party’s clampdown on mining, party members and especially officials were ethically expected to abstain from Proof-of-Work (PoW) mining, making the Xiao Yi offence more grievous.
“Xiao Yi seriously violated the party’s political discipline, organizational discipline, integrity discipline, work discipline, and life discipline, and constituted a serious job violation and was suspected of taking bribes and abusing power,” the report reads.
In addition to expelling Xiao Yi from the party, the disciplinary committee said it has referred the case for additional legal sanctions.
“He was expelled from public office by the State Supervision Commission; his qualifications as a representative of the 19th National Congress of the Communist Party of China and the 14th Party Congress of Jiangxi Province were terminated; his income from violations of discipline and law was confiscated; his suspected crimes were transferred to the procuratorial organ for review and prosecution in accordance with the law,” the party concluded.
Over the coming months, more related sanctions for offenders of the Bitcoin mining ban may become a trend in no time.
Bitcoin entrepreneur and podcaster John Carvalho might be on to something. Ina recent episode of the Tales from the Cryptpodcast, he posed his theory on why did China shot itself in the foot by banning Bitcoin mining early in the year. We at NewsBTC have been racking our brains trying to come up with possible reasons for the bizarre decision.
Are theymaking way for their CBDC? Is the CPCcutting the wings of Chinese Billionairesin all areas? Were they alreadylosing the hashpower battle? Is China having energy problems? Is thisan ESG issue? Were theyclosing the exit ramps before the Evergrandecollapse? IsBitcoin just too dangerous? Why would theyretire from a Billion Dollar Businessthat they controlled? Why? WHY?
It has been a long time since I last joined TFTC to chat.
I had a great time discussing misc Bitcoin and “good morning tweet” topics.
Check it out! https://t.co/TVbOEjHWFD
— John Carvalho (@BitcoinErrorLog) November 2, 2021
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The interviewee summarizes our position with one phrase, “I refuse to believe that China is stupid.” According to Carvalho, they’ve made too much money in the mining business alone, and they also control the ASICs manufacturers. Not only that, mining machines inflate the value of chips. And they control that business too, alongside Taiwan and South Korea. Why would they shoot the goose that laid the golden eggs? It just doesn’t make sense… unless…
Carvalho’s Mind Blowin Theory
Warning: the following text is full of speculation and assumptions. “I can easily be wrong,” was one of the first things Carvalho said. He doesn’t have any proof that this is what happens and neither does NewsBTC. Let’s take it as a thought exercise. This is how Carvalho would “play the game,” though. And if he could come up with that plan, so did the CCP leaders.
According to Carvalho, every cycle China manipulates the Bitcoin price to get more BTC. They sell, use the collateral to short Bitcoin, and reaccumulate when the bear market arrives. This time, though, China was facing a more mature and sophisticated market. Their FUD techniques were not working. People weren’t falling for their tricks. So, they had to turn it up a few notches.
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The main ASIC manufacturer, the Chinese company Bitmain, had a new generation of miners ready. So, the CCP “decided to create a demand for the aftermaket and combine it with the FUD.” As they usually do, they sold their Bitcoin and made their shorts. Then, China banned Bitcoin mining and the whole country turned off the ASICs. The world perceived the ban as real, just “look at the hashrate.” This is the first time this happens. Then, China sold a small portion of its ASICs to the USA.
According to the latest stats, the USA now provides the biggest percentage of Bitcoin’s hashrate… or does it? “Everybody has this narrative where China has stupidly left mining and giving it to the US,” Carvalho said unconvinced. A few months after the China ban, American mining companies are suddenly on everyone’s radars. But, is this really what’s going on?
If The Theory Holds Up, China Will Come Back To The Mining Game
This is price manipulation on another level. China figured out a way to get more Bitcoin both against traders and against buyers of ASICs in outside countries. They got rid of the old equipment, and Bitmain will provide new machines soon enough. Then, China’ll buy back their Bitcoin, and turn their next-gen ASICs on. According to Carvalho, maybe they already did, and they’re just not signing blocks or signing their blocks differently. If this is true, they’ll unban Bitcoin mining soon enough, and spin a “the resurrection of Asian mining” narrative.
The Tales From The Crypt host, Marty Bent, is not convinced. He argues that we have to separate CCP from the individual Chinese miners. It’s worth noting that Bitcoin mining is Bent’s field of expertise. He is himself a miner and is involved with some mayor Bitcoin mining companies.
According to Ben, there definitely have been mining farms that operated in mainland China and moved to the US. And sizable operations, at that. He thinks that maybe the Chinese didn’t move all the hashrate to the U.S., but they definitely moved “a material ammount.” He also believes that, even after the ban, there’s definitely hashrate still in China.
According to Carvalho, there’s anecdotal evidence that contradicts the theory, but it’s only anecdotal. “We don’t have enough information about China,” he says. Bent agrees and adds that, due to the permissionless nature of the Bitcoin network, we can never truly know what’s happening. However, “foreign buyers are getting access to new gen miners.” At least to the preorders. Take that for what it’s worth.
BTC price chart for 11/08/2021 on Bittrex | Source: BTC/USD on TradingView.com
Conclusion And Other China Theories
According to Carvalho, using web traffic measuring tools, you could check that traffic to the Chinese mining pools is roughly the same as before the ban. The signing of blocks is manipulatable. “The only reason we know who mines what is because they say they mined it,” he says. What does this mean? Are the Chinese already mining with? Is there an increase in unsigned blocks? Or are they just signing them as non-Chinese entities? They could’ve been planning this for a long time, setting the pieces in place.
The TFTC host poses an alternative theory. This one’s based onhis conversation with Edwar Evenson from Braiins, who lived in China. According to Evenson, this year marked the 100th anniversary of the CCP, and the theme of the celebration is “harmony.” And, sadly, they consider Bitcoin mining as unharmonious. That’s the reason they banned it. Once the anniversary passes, they’ll quietly allow it back.
Maybe, but according to Carvalho, the Chinese quietly returning to mining is exactly what would happen if any of the two theories are true. He admits that, to confirm his theory, serious research that he can’t perform needs to be done. So, he leaves it open to the public to step up and do it. NewsBTC did its part by publishing this article. It’s your turn now.
Featured Image by panayota from Pixabay - Charts by TradingView
As the prospect of Chinese property giant Evergrande defaulting on $305 billion worth of debt looms, pundits are weighing in on how the firm’s bankruptcy could impact the legacy and crypto markets.
Speculation as to whether the real estate investment giant will default has coincided with a downturn across the crypto and stock markets, leaving many analysts divided on whether traders should be buying the dip or looking to take profits in preparation of further bearish momentum.
At the time of writing, Bitcoin (BTC) is down by around 13% since the downturn started on Sept. 18, while the S&P 500 is down by 1.7% and the Hang Seng has dipped 2.8% within the same time frame.
Some are asserting that Evergande’s possible default could represent another Lehman Brothers moment — citing the major investment bank’s 2008 declaration of bankruptcy on $600 billion worth of debt that kicked off the Global Financial Cris.
However, speaking at the Greenwich Economic Forum on Sept. 22, Bridgewater Associates co-chairman and co-CIO Ray Dalio downplayed the significance of an Evergrande default and suggested that the debt is “manageable.”
Dalio admits that while investors will be stung, he thinks that Evergrande’s debt won’t cause structural damage, as the Chinese government may swoop in to restructure the firm and strike deals with the company. He said:
“[The] Lehman moment produced pervasive structural damage through the system that wasn’t rectified until the Treasury came across in terms of its borrowing and then the Fed came across with quantitative easing, but this is not that kind of a shake-up.”
Ming Tan, a director at the credit rating agency Standard & Poor’s (S&P) similarly predicts the Chinese state will intervene to restructure Evergrande.
Speaking to Financial Times on Sept. 20, Tan speculated that said restructuring is likely to see the “profitable parts of [Evergrande’s] business bought up by rivals,” with its debt obligations likely to be underwritten by either a consortium of commercial Chinese banks or the local central bank directly.
On the same day, the host of CNBC’s Mad Money show, Jim Cramer, asserted Evergrande’s debt issues will likely impact the crypto market because nearly half of the reserves backing the leading stablecoin Tether (USDT) are held in commercial paper
Cramer urged for investor caution while Evergrande awaits a verdict on a potential government bailout, stating:
“I know the crypto-lovers never want to hear me say sell, but if you’ve got a big gain as I did, well, I’m begging you: Don’t let it become a loss. Sell some, stay long the rest, then let’s wait and see if China changes its attitude toward an Evergrande bailout.”
While Tether has denied holding any commercial paper issued by Evergrande, analysts have warned that the fallout from an Evergrande restructuring could have significant impacts on the broader commercial paper markets.
“Tons of Chinese businesses stand to get crushed by this fiasco, and they have Evergrande exposure, and that could spell real trouble,” said Cramer.
27/31
Currently both Tether and Circle hold commercial paper, and while I think it unlikely that either would have large swaths of Evergrande bonds, the whole market will reel a bit.
— Adam Cochran (@adamscochran) September 14, 2021
Marty Bent, a podcaster and the co-founder of Great American Mining, also sounded alarm bells in his Sept. 20 newsletter.
Bent suggested that an Evergrande default will unveil how “exposed the Western world is to China’s economy” via investments in the large real estate players, their debt instruments, and the debt issued by the Chinese Community Party (CCP).
“Evergrande is going under and it is dragging other large real estate developers in China down with it. The world is witnessing another Lehman moment,” he said.
Bent also questioned the assertion that Evergrande is likely to be bailed out by the government, noting the party’s recent push to rein in Chinese capitalism and tighten regulations on the real estate market.
“The CCP has come out and stated that they do not plan on backstopping the real estate developers who are currently plummeting toward bankruptcy. It will be interesting to see if they keep this posturing as things get worse,” he said.
The podcaster also noted that while he unsure how the fallout from Evergrande will impact Bitcoin in the short to medium term, he is “thankful” he can hold Bitcoin as a hedge against the fiat-backed global financial system.
Ok who is buying the dip?✋
— Dan Held (@danheld) September 21, 2021
rRela ‘Extreme fear’ as Bitcoin falls below $40K … and then bounces
The share price of Evergrande has been steadily declining during 2021 as its credit woes have mounted. After opening the year at roughly $14, the price sits now at $2.20 — a loss of more than 84%.
