Following China’s crypto mining crackdown of the past few weeks, Bitcoin on-chain activity has fallen dramatically this week to return to levels not seen in a year, latest analysis from GlassNode shows. The analytics firm adds that the fall is making a simultaneous seismic shift possible in the Bitcoin mining markets as hash-rate falls and crypto miners are ramping up spending. 

After the crackdown, China still dominates the news as it introduces crypto curbs on Monday when the People’s Bank of China said it had summoned Alipay online payments platform and five big lenders to inform them to identify cryptocurrency exchanges and dealers so as to cut off any crypto trading. The disclosure impacted the price of Bitcoin badly. The top cryptocurrency slumped below $30,000 for the first time since January thus seeing the crypto market go down 25% over the last week. 

Why China’s ban was bad for Bitcoin price 

“For someone who sort of appreciates blockchain technology and proof of work, the idea that there was so much hash power in mining concentrated in China was something that was actually a negative for the thesis long term Bitcoin,” says Fundstrat’s Tom Lee, on why the market reacted badly to the national mining ban in China. He adds: 

“It’s the same reason that people don’t want to see oil production in politically-unstable areas. You really want censorship resistance to mean mining should be done where its lowest cost of production and that wasn’t necessarily China. So it’s absolutely a positive development but institutional investors aren’t necessarily the new buyers of Bitcoin in 2021. I think there is retail and a lot of minimum investing and I think that their reaction to the headlines is really speaking to the idea that you are trying to transfer Bitcoin right now from these sort of mean hands or people buying it for the price into hands of people who really appreciate the technology and the idea of sound money.”

Lee stresses the need to keep a perspective in mind even with the flurry of bad news that hit Bitcoin from basically national mining bans to tremendous regulatory scrutiny in the US. 

“If you look at any other year, these would have taken Bitcoin deep into a bear market, into a crypto winter and yet Bitcoin is really only 50% off its highs,” he said. “The idea that it’s below $30,000 now doesn’t rule out the ability for this to generate some really big gains before year ending and potentially touch $100,000 or higher.”

China will always be an important market for crypto

Meanwhile, despite the dislike, top crypto investor, Mike Novogratz suggests in his interview with CNBC’s “Squawk Box” Tuesday that China remains an important market for crypto. “What the Chinese have proven over and over not just in the crypto era but in the last thirty years (is): if they want their money offshore they can find a way to get it offshore,” Novogratz said. “I don’t think we are going to see Chinese people stopping to participate in crypto. The government is going to make it more difficult, 100%… Chinese always want a hedge against the authoritarian regime. They don’t want all their money in China and crypto is freedom. So you’ll see Chinese find plenty of ways to own Bitcoin.”