Do any of you remember the 1979 film ‘The China Syndrome’? In it, a news reporter (Jane Fonda) and her cameraman (Michael Douglas) are unintentional witnesses to a SCRAM incident, an emergency core shutdown procedure at a nuclear power plant in California. The crew prevents a catastrophe, but the plant supervisor (Jack Lemmon) begins to suspect the plant is in violation of safety standards, and tries desperately to bring it to the attention of the public, fearing that another SCRAM incident will produce an atomic disaster.
You may ask why was it called ‘China Syndrome’ when the action took place in California. The answer is that the nuclear meltdown scenario in the film is based the fanciful idea that there would be nothing to stop the meltdown tunnelling its way to the other side of the world, i.e. China.
This week we have seen another form of ‘China Syndrome’ in the cryptocurrency markets. Bitcoin, Ethereum, Cardano and others have plummeted in value after Beijing renewed efforts to rein in the sector by cutting power to bitcoin miners in Sichuan province over the weekend, one of the country’s largest producers of the digital currency, writes Robert Hart at Forbes.
China accounts for 80% of global bitcoin operations and the crackdown in Sichuan has cut the country’s bitcoin production by more than 90%, according to China’s Global Times. This state media source also says, “regulators in other key mining hubs in China’s north and southwest regions have taken similar harsh steps.”
The move has cut bitcoin’s hashrate and caused bitcoin to drop to its lowest value in nearly two weeks. As you’ve probably noticed, the altcoins suffered as well.
China has an abundance of cheap electricity, making it an ideal location for energy intensive bitcoin mining, and Sichuan has an abundance of hydropower, hence its regional domination of the sector. However, a great deal of the energy used for mining coming from coal power stations, which means the industry is at odds with China’s new climate goals…and Elon Musk’s thinking.
This sounds commendable for a cleaner energy future, but that is not the only reason China has clamped down on mining. According to Hart, “China is also keen to prevent cryptocurrencies from “infringing” upon financial order, prompting a ban on financial services facilitating crypto trade.”
China has been causing problems in the cryptocurrency market since May when it announced its intention to intensify its regulatory crackdown on cryptocurrencies, something it does periodically.
Shentu Qingchun, CEO of Shenzhen-based blockchain company BankLedger, told the Global Times on Sunday: “We had hoped that Sichuan would be an exception during the clampdown as there is an electricity glut there in the rainy season. But Chinese regulators are now taking a uniform approach, which would overhaul and rein in the booming Bitcoin mining industry in China.”
And then he added, “As a result, Chinese miners must form alliances to migrate overseas, to places such as North America and Russia.” It sounds like a move that might stop the meltdown that is currently tunnelling from China to the rest of the world.