Bitcoin and Ethereum tumble again as China expands massive crackdown on cryptocurrency mining

BITCOIN and Ethereum are tumbling AGAIN as China expands its massive crackdown on cryptocurrency mining.

Bitcoin took a 10 per cent hit on Monday while smaller rival Ether plummeted 12 per cent, falling below $2,000 for the first time in almost a month.

China is widening its crackdown on crypto-miningCredit: Reuters

At the time of writing, Coindesk shows Bitcoin price as $32,342.30, while Ether is at $1,956.44

Both cryptos dive-bombed after China broadened a tough crackdown on its massive – but highly lucrative – cryptocurrency mining industry.

Miners create new cryptocurrencies using a complex computer code in a complex and energy-intensive process, which requires a lot of computer power.

Authorities in the southwest province of Sichuan ordered crypto-mining projects to close last Friday.

They’ve completely banned Bitcoin mining in the key southwestern province.

Chinese media reported that electricity supply to all crypto mines across the province was stopped at midnight Sunday.

Despite the war on crypto, Chinese mines power nearly 80 per cent of the global trade in cryptocurrencies.

And this is despite a domestic trading ban since 2017.

Ether has also plummeted in value, as it works in tandem with BitcoinCredit: Getty

But in recent months several provinces have ordered mines to close as fed-up officials in Beijing turn a sharp eye upon the secretive industry.

The State Council, China‘s cabinet, last month declared war on Bitcoin mining and trading as part of a series of measures to control financial risks.

“Crackdown on Chinese miners might mean that they are offloading coin into a thin market and taking us lower,” said Ben Sebley of London-based crypto firm BCB Group.

Sichuan is China’s second-biggest Bitcoin mining province, according to data compiled by the University of Cambridge.

Some miners shift production there in the rainy summer to take advantage of its rich hydropower resources.

Companies that mine Bitcoin typically hold large inventories of the cryptocurrency, with any moves to sell large amounts depressing prices.

Bitcoin has dropped by over a fifth in the last six days, and is down by half from its April peak of just shy of $65,000.

However, it has gained over 10 per cent overall this year.

Smaller rival Ether, the second-biggest cryptocurrency by market capitalisation, which tends to move in tandem with Bitcoin, dropped as much as 12 per cent, falling below $2,000 for the first time in almost a month.

Beijing’s bans on crypto-mining have been issued in other major Bitcoin mining hubs, including Xinjiang, and Inner Mongolia.

China is cracking down on the mining of BitcoinCredit: AP

Citizens have been encouraged to snitch on illegal mines.

China has also blocked a slew of cryptocurrency-related social media accounts.

For example it has barred searches for major cryptocurrency exchanges such as Binance and Huobi on baidu.com and Twitter-like platform Weibo.

Agriculture Bank of China (AgBank), the country’s third largest lender by assets, said on Monday that it was following guidance from the central bank to clamp down on cryptocurrency trading and mining activities.

AgBank is the first major state bank to make a public statement against crypto.

If a client is found to be involved crypto trading, its account would be immediately shut, and relationship cut, the lender announced.

Bitcoin had been bouncing after Elon Musk tweeted about the cryptocurrencyCredit: AFP

Bitcoin’s price drop on Monday comes days after it tumbled in the wake of more comments from Elon Musk.

The Tesla leader had a Twitter spat with Kraken boss Jesse Powell.

The billionaire was offended when Powell said he was ignorant about the cryptocurrency and that he should “do more studying”.

Powell said he believed that Bitcoin’s price would spiral by the end of this year, to allow investors to buy a Lamborghini with just “one Bitcoin”.

Musk took umbrage when the Kraken boss said that Bitcoin was “greener” than critics report, and that he “has some more studying to do”.

He replied with a deadpan: “Based on what data?”

Musk’s comment was the latest in a series of remarks he has made about Bitcoin’s use of fossil fuel being destructive.

He’s made numerous backflips over Bitcoin – alternatively supporting the cryptocurrency, before doing a U-Turn and indicating he’s not a fan.

What is cryptocurrency mining?

Cryptocurrencies have to be “mined” in order to be created, which is a complex and painstaking process involving a lot of computer power.

Cryptocurrencies are digital currencies which are stored on an online network called the blockchain.

Blockchain technology, which can seem very complicated, is a kind of database used to record financial transactions.

Individual Bitcoins are created by computer code.

You can collect coins by solving computer equations – which is a process called mining.

The majority of other cryptocurrencies are created using a similar mining process, including Dogecoin.

Mining Bitcoin involves using a computer to solve a mathematical problem with a 64-digit solution.

For each problem solved, one block of Bitcoin is processed. In addition, the miner that is first to solve the problem is rewarded with new Bitcoin.

To compensate for the growing power of computer chips, the difficulty of the puzzles is adjusted to ensure a steady stream of new Bitcoins are produced each day.

There are only about 21million Bitcoins that can be mined, and roughly 18.5 million have been found so far.