China Aims to Further Weaken the U.S. Economy Through Bitcoin

China has been sending money out of the U.S. and into its own economy through Bitcoin, in an apparent effort to hurt U.S. exports while strengthening their own domestic business relationships as part of a trade war that is entering its fourth year.

The situation has caused the losses of up to 245,000 jobs; the Chamber of Commerce calculated that each state’s exports are at risk. For example, Florida alone has already seen a loss in export revenue exceeding $1.9 billion.

In the meantime, China was taking a different approach. It not only imposed reciprocal sanctions and exported its products through intermediary countries — Vietnam, Taiwan, and Mexico — but also arbitraged American goods by purchasing U.S. risk assets with cryptocurrency as well, making the United States pay for more tax regulation of those assets

On top of this strategy, China is economically exploiting America’s market position in risky assets at the same time it erected tariffs on their behalf to see what they would do next; China began buying up all the world currency debt available to them — China now owns some $1 trillion worth (about 10%).

Hidden Billions

The United States injects billions of dollars into China’s economy annually because most Bitcoin, which is mainly exchanged for U.S. dollars worldwide, is mined in the country and it hosts 65% of all mining farms.

To earn Bitcoin rewards, powerful computers solve complex math problems 24 hours per day. Part of the newly mined coins goes directly to crypto exchanges, while the rest can be kept in the miners’ wallets and is eventually sold for dollars. As of June, the global average mining output is 900 BTC every day, generating nearly $31 million per day in total revenue. Over a 12 month period, miners have earned over $10 billion.

Estimating China’s share of mining farms, since last summer the local miners have earned about $7 billion. If the price of Bitcoin continues to rise and attract more investors, it will potentially double or even triple each year. Since money flows through China’s economy, in one way or another it will contribute to the country’s revenue: either by injecting income for spending purposes or being invested as a financial asset.

The Chinese governments rule

The Chinese government is aware of the vast amount of U.S. investments through cryptocurrencies, and despite heavy regulation, they are not going to ban Bitcoin.

China originally had strict restrictions on Bitcoin transactions for banks and payment companies in 2013. The authorities then shut down local cryptocurrency exchanges in 2017, restricting access to foreign ones as well. Being a national currency when the policy was made allowed locals to invest in crypto themselves without issue all this time — what we’re watching now is just day-to-day practice, not new rules added on by the government.

Wrapping things up

When announcing any restrictions again, China wants both of these things: first, they want to prevent individual risks from affecting society as a whole; and second, they are leaving the door wide open for international investors once more.

At the same time, China has begun to restrict mining, which concerns many on the market.

The only option for the U.S. government is to weaken Bitcoin’s appeal through every possible means.

This would explain why Elon Musk suddenly switched from supporting Bitcoin to criticizing its environmental impact. Whether this is true remains to be seen but one thing is for certain this is only the start of the turmoil between China and the USA.

Source: Cointelegraph news

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