Illegal Chinese Crypto Mining Strike Could Alleviate Suppressed Prices
By Tyler Smith – Cryptocurrency Broker
This week, Chinese police personnel arrested a Bitcoin mining gang that used $3 million worth of stolen electricity for their crypto mining operations. There were over 4,000 mining devices being used in this illegal operation and gang members would sell Bitcoin generated to fund their operation.
Although the exact sum of Bitcoin generated through this operation isn’t clear, it has the potential to be quite a lot. There are more pressing matters that this may be just one of many possible illegal mining activities being conducted in China. Due to low energy costs, China is appealing for mining which in turn attracts illicit mining. Another issue as the Bitcoin received is newly minted, is it’s not flagged when they sell Bitcoin to the markets, though it could have illegally been obtained.
At present, the cost of mining one Bitcoin in China is approximately $8,000 when factoring the cost of electricity at around $0.045/kWh. However, when the cost is zero, the only expenses to be incurred are from the mining rigs, rent, and personnel. With the cost of electricity already having a huge impact on profitability, it indicates that those mining off free electricity can sell crypto generated and break even at lower prices than $8,000, which is even lower than the global BTC price.
There is a huge incentive for selling Bitcoin at the earliest chance one gets, which results in depressed prices and strong volatility. It has also been suggested that on days in which volumes are lower, such as the weekend, the number of Bitcoin that is required to initiate a collapse is incredibly lowered. This is caused from users looking to sell cryptocurrency hitting the offers to buy until the liquidity is gone.
Furthermore, when the cost of breaking even is low, the chances for prices to remain depressed is escalated.
In 2018 ordinary miners were doing business at a loss when Bitcoin hit its annual low and the breakeven cost was at $3,550. They were then incentivised to refrain from selling Bitcoin and hold onto it till the price increased or cease their mining operation.
Don’t forget you can sell Bitcoin UK through our trusted platform to exchange Bitcoin to GBP.