The price of Bitcoin continued to decline, and the renewed Chinese crackdown on local mining activity helped explain this sudden drop.
About 400,000 miners in Xinjiang province were forced to stop operations and go offline. This sudden disruption cut off income sources, prompting some operators to sell Bitcoin holdings to cover operational costs or fund transition efforts.
Disruptions in mining increase the pressure on Bitcoin's decline
Former Canaan CEO Jack Kong mentioned in a recent social media post that computing power in China fell by about 100 exahashes per second (EH/s) over 24 hours. He explained that this decline, estimated at around 8%, came after hundreds of thousands of mining machines were shut down.
This news surfaced shortly before Bitcoin fell to 86,000 dollars on Tuesday, surpassing the 90,000 dollar level it maintained over the past week.
Some analysts see the timing of events as no coincidence, pointing out a correlation between the cessation of mining and price drops.
They indicate that these sudden and severe measures often force miners to take immediate actions, increasing market pressure in the short term.
Shutting down miners leads to liquidity pressures and sell-offs
According to Bitcoin analyst Nomilimett, when miners are forced to stop working, it typically follows a chain of reactions.
This includes an immediate loss in revenue, an urgent need for liquidity to cover operating expenses or transition costs, and in some cases, forced selling of Bitcoin holdings.
These dynamics may directly extend to the broader cryptocurrency market. When about 8% of Bitcoin's computing power is suddenly taken offline, uncertainty rises, and price pressure increases in the short term.
Nomilimett explained that this creates real selling pressure, not the opposite.
The timing amplified the impact. The mining sector in China has only recently reestablished its position as a major contributor to the global hash rate.
The return of mining faces unexpected regulatory pressure
Less than a month ago, China regained its position as the third largest center for Bitcoin mining globally. The hash rate index indicated that the country accounted for about 14% of the global hash rate by October.
Although authorities imposed an official ban on mining in 2021, illegal mining activities continued to expand across the country.
Analysts indicate that access to low-cost energy and surplus electricity in some regions are key drivers behind this recovery.
In this context, the tightening of the campaign this week surprised miners. After regulations were suddenly tightened and Bitcoin's mining power declined, miners' revenues quickly became the focus.
These pressures were exacerbated by Bitcoin's decline of about 30% from its peak in October and the consistently low transaction fees, pushing miners' revenues to recent lows.
As mining supports the security and operation of the Bitcoin network, the recent price decline seems to align with broader disruptions, although the full impact may become apparent over time.
