China bans Bitcoin mining —> Chinese miners need to move —> Miners sell their Bitcoin reserves to fund the migration in which tens of thousands of machines will need to be transported thru national borders as well as housing considerations and etc. —> Bitcoin price falls during sell-off and alts follow —> miners get situated, resume business, and market begins to recover
By now, it should be clear the “hashrate migration” is real: Miners are leaving China for good. As of April 2020, an estimated 65% of bitcoin hashrate was domiciled in China; with confirmed bans across the country, that figure will be far lower 12 months from now. The precise magnitude and schedule for the westward move is currently unknown, but all signals seem to be indicating the greatest shakeup in the geographic makeup of bitcoin mining since the start of the industrial mining era. - Nic Carter, co-founder of Coin Metrics, a blockchain analytics startup.
Glassnode's Analysis
[Source] One of the largest migrations of Bitcoin hash-power in history appears to be underway. Following an official ban on mining activities in a number of Chinese provinces, many miners are in the process of shutting down or migrating their hash-power outside of China's borders (since June 19).
Over the past two weeks, the estimated mean hash-rate (7DMA) has declined by around 16%, falling from approximately 155 EH/s to around 125 EH/s. Hash-power has now returned to levels that were sustained throughout mid 2020.
The crackdown is genuine. Machines are being turned off and hashrate is dipping
As the Chinese mining industry comes to grips with the logistical challenges of relocating, migrating or selling their hardware and facilities, some are likely to liquidate a portion of their accumulated BTC treasuries. These coin sales may represent miners hedging risk, obtaining capital to facilitate and fund logistics, and for some miners, may be a general exit from the industry entirely.
The Miner net position change metric shows the 30-day rate of change of miner unspent supply. This shows a notable increase in distribution over the last two weeks, generally coincident with the decline in overall hash-rate. Miners have on net distributed at a rate of around 4k to 5k per month over the last two weeks. This has reversed the trend of net accumulation which was active since April.
This is also causing a large sell-off as miners need cash to facilitate and fund the migration
Finally, we take a look at the holdings on OTC desks which are utilised by miners for matching their large size distribution, with large volume buyers.
During both the May Sell-off and over the last two weeks, between 3.0k and 3.5k BTC in net inflows have been observed. However in both instances, almost the full inflow size was absorbed by buyers over just a few weeks. On aggregate, the total BTC holdings on OTC desks we monitor have remained relatively flat since April.
But the demand is there to keep us at bay
tl;dr: What you're experiencing right now is the price to pay for the China FUD narrative losing all of its teeth. What doesn't kill crypto, makes it stronger.
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