Bitcoin's Rally Could Be Caused by a Supply Crunch in China

Publié le by Coindesk | Publié le

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That's because Chinese miners are struggling to sell their crypto in ways that would quickly get them much-needed cash in the face of a government crackdown on local exchanges.

"The lack of supply has fed extremely well to the trendiness of this rally, without any of the large sell-downs typical of miner activity in the past," Singapore-based trading firm QCP Capital noted in its Telegram channel.

Miners mostly operate using cash and offload their bitcoin holdings onto the market almost daily to fund their expenses, mainly electricity costs, which are to be paid in the local currency.

Chinese miners, who control over 70% of bitcoin's hashrate or mining power, have been facing challenges liquidating their crypto holdings for cash because many are finding their bank accounts and cards frozen as a part of the Chinese government's nationwide crackdown on telecommunications fraud and money laundering via cryptocurrency deals.

QCP cited a blog by a Chinese crypto watcher going by the name Wu Blockchain, who found that 74% of the miners he polled are facing difficulty meeting electricity expenses.

"There are also miners who said that the mining machine has been shut down for a month because they cannot sell the currency to pay the electricity bill," Wu added, according to a Google translation of his blog.

"Some OTC companies that specialize in serving miners have also terminated their business."

Thomas Heller, formerly global business director at the mining pool F2Pool and now chief operation officer of mining and media firm HASHR8, confirmed the Chinese miners' predicament earlier this week, saying it's currently a "Challenge" for Chinese miners to convert bitcoin and tether into cash.

"Mining pools were selling large chunks of bitcoin in early September through exchanges, but this was hastily halted as their last remaining fiat off-ramp avenues were impacted with the arrest of large exchange heads like Star Xu and other brokers," QCP Capital said.

Miner selling pushed bitcoin lower, roughly from $12,000 to $10,000, according to QCP Capital.

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