Monthly report of June
This monthly report goes deeper into the most significant events in the cryptocurrency world in June.
June in the cryptocurrency markets
June was a red month for cryptocurrencies, meaning that prices of almost all cryptocurrencies fell during the month. The price of Bitcoin fell by about 5%, while the price of Ethereum dropped by about 15%. The prices of Litecoin, Aave and Chainlink sank even more than the prices of two largest cryptocurrencies. During June, there were no very significant news items related to altcoins, i.e. other than Bitcoin, which would have exceeded the news threshold in the Finnish media. During June, there were a few quite significant news items about Bitcoin, two of which are covered in this monthly report. Bitcoin and cryptocurrencies took a significant step forward when El Salvador announced that it would be the first country to make Bitcoin legal tender. On the other hand, the downturn in the cryptocurrency market was partly due to the restrictions and bans imposed by China on Bitcoin and in particular its mining.
El Salvador adopts Bitcoin as legal tender
El Salvador’s President Nayib Bukele announced at a Bitcoin conference in early June that El Salvador would be the first country to adopt Bitcoin as legal tender. The announcement received quite a lot of media attention and the progress of things is still closely monitored, especially in the cryptocurrency community. Shortly after El Salvador’s announcement, the social networking service Twitter saw an interesting trend, with politicians from nearly ten Central and South American countries changing a Bitcoin-themed profile picture. It is therefore possible that the example of El Salvador will be followed in the near future by some other Central and South American countries.
El Salvador is a country in Central America with a population of about 6.5 million. About 70% of the country’s population does not have a bank account and Bitcoin is hoped to improve the financial position of its citizens. With Bitcoin, anyone who owns a smartphone can get a Bitcoin wallet that allows them to save and pay. At the end of June, the country’s own cryptocurrency application, Chivo, was released. As the app was released, there was an announcement that every adult El Salvadoran who downloads the app and registers there will receive $ 30 worth of Bitcoin from the country. Bitcoin distributed by the country differs significantly, for example, from the $ 1,400 checks distributed to many citizens in the United States. In the U.S., the Fed “printed” those dollars from scratch, while El Salvador buys bitcoins from the free market because Bitcoin cannot be created by anyone’s decision.
Bitcoin mining in the news
Bitcoin mining was a big topic in cryptocurrency news in June. There was news from El Salvador on the subject when the country’s president said they plan to use the energy from the volcanoes to mine Bitcoin. This energy is completely clean and renewable and also does not cause pollution. China has also been on the news in connection with the mining of Bitcoin, but because of very different decisions. Already in May, it was announced in China that they intended to crackdown the mining and trading of Bitcoin in the name of financial stability, among other things. At the end of June, China’s second-largest province, Sichuan, ordered Bitcoin miners to shut down their operations.
Consequences of the Chinese mining ban
Throughout Bitcoin’s history, even most of Bitcoin’s mining power has come from China. However, this issue is now on the brink of big change, as many miners are leaving China or closing down as a result of recent warnings and decisions. The miners' target countries are, for example, the United States, Canada and Kazakhstan. In the short term, this has led to a drop in the Bitcoin hash rate which means the computing power of the Bitcoin network. In general, the more computing power the network has, the better and more secure the Bitcoin network. On this basis, it can therefore be assumed that the reduction in computing power resulting from the Chinese actions is a negative thing for Bitcoin. However, many experts believe that in the slightly longer term, this might be a very positive thing.
Indeed, for a long time, one of the risks associated with Bitcoin's operations has been the excessive concentration of miners in China. This has been seen to threaten the “basic nature” of Bitcoin, as one of the most important features of Bitcoin is the decentralization of its network. However, it now appears that we are moving in a better direction on this issue, as Chinese miners’ share of Bitcoin network’s hash rate is falling.
The high energy consumption and environmental impact of Bitcoin mining has been criticized for several years. However, miners have shifted to using more renewable energy sources and this trend is expected to continue in the future. Relatively most non-renewable energy sources for Bitcoin mining are used in China. Indeed, many experts believe that the departure of miners from China will accelerate the use of renewable energy sources in Bitcoin mining.
Summary
China’s restrictions and bans on Bitcoin have been contributing to the recent decline in the cryptocurrency market. However, many believe that the impact of China’s decisions may be positive in many ways in the longer term. The news of El Salvador was a significant step forward in the history of Bitcoin and cryptocurrencies. The positive reaction of politicians from many other Central and South American countries to the news also suggests that more similar decisions may be seen in the future.
Ville Viitaharju
Cryptocurrency specialist
Last updated: 14.03.2022 13:52
