The various aspects of the mining industry and exchanges under the heavy pressure of regulation: What is the difference between this time and "9.4"?

Original title: "Li Shuo | If OH announces the closure of domestic exchanges"
Written by: Zhang Li Lianwen is authorized to reprint with the author's permission

First, let's review the 51st meeting of the Financial Stability and Development Committee of the State Council. Article 2: Resolutely prevent and control financial risks. Adhere to the bottom line thinking, strengthen all-round scanning and early warning of financial risks, promote the reform and risk reduction of small and medium-sized financial institutions, focus on reducing credit risks, strengthen the supervision of platform companies' financial activities, crack down on Bitcoin mining and trading, and resolutely prevent individual risks from spreading to the social field.

All subsequent policies targeting the industry were based on the content of this meeting.

Regarding the crackdown on mining, the spirit of the meeting was conveyed to local governments and then the implementation regulations were formed. The speed of local governments was very fast. First, in Inner Mongolia, where thermal power is concentrated, on May 25, the Inner Mongolia Development and Reform Commission’s official account released an announcement on soliciting public opinions on the "Eight Measures of the Inner Mongolia Autonomous Region Development and Reform Commission on Resolutely Cracking Down on and Punishing Virtual Currency "Mining" Behavior (Draft for Comments)". The eight measures announced are quite representative and basically provide ideas for other regions to formulate policies, so the full text is excerpted as follows:

1. For industrial parks, data centers, self-contained power plants and other entities that provide venues and power support for virtual currency "mining" companies, in accordance with the "Energy Conservation Law of the People's Republic of China", "Electricity Law of the People's Republic of China" and other relevant laws and regulations, we will increase energy conservation supervision and reduce energy consumption budget indicators; for those who deliberately conceal and fail to report, fail to clear and close down in a timely manner, and fail to approve and supervise, they will be held accountable in accordance with relevant laws and regulations and party regulations.

2. For big data centers, cloud computing companies and other entities that engage in virtual currency "mining", the competent authorities will cancel all preferential policies, withdraw them from the Inner Mongolia Power Multilateral Trading Market, and strictly deal with them in accordance with the "Energy Conservation Law of the People's Republic of China" and hold them accountable.

3. For communications companies, Internet companies and other entities that engage in virtual currency "mining", the competent authorities shall revoke their value-added telecommunications business licenses in accordance with the relevant provisions of the "Telecommunications Regulations of the People's Republic of China" and strictly investigate and hold them accountable.

4. For Internet cafes and other entities that engage in virtual currency "mining", the competent authorities shall suspend their business and rectify the situation in accordance with the law.

5. For entities such as virtual currency "mining" projects that privately connect to power supply without approval, their illegal electricity theft will be transferred to judicial authorities for handling in accordance with the Criminal Law of the People's Republic of China and other relevant laws and regulations.

6. If enterprises, individuals or other entities engage in illegal activities such as money laundering in the form of virtual currency, they shall be transferred to judicial authorities for handling in accordance with the Criminal Law of the People's Republic of China and other relevant laws and regulations.

7. If enterprises, individuals or other entities use virtual currency to engage in illegal fundraising or other activities, the competent authorities shall strictly handle them in accordance with the Regulations on Preventing and Dealing with Illegal Fundraising and other relevant laws and regulations.

8. Relevant enterprises and relevant personnel engaged in virtual currency "mining" will be included in the dishonest blacklist in accordance with relevant regulations; public officials who use their official positions to participate in virtual currency "mining" or provide convenience and protection for it will be transferred to the disciplinary inspection and supervision authorities for handling.

Inner Mongolia is one of the first local governments to deal with mining companies. It is conservatively estimated that the bitcoins mined here account for a quarter of the world's total. The mining province benefits first from local coal-fired power, second from land, and third from policy support. Friends who have visited the mines in Inner Mongolia should first feel that it is "large" and second from "barren". The area of ​​the ordinary rooms in the best hotels in Ordos is 1.5 times that of other cities, and the price is only three or four hundred yuan. Outside the hotel is a huge public square, and there are two shopping malls around it. It is the city center of the city center. Even in the evening when the crowds gather, the square is sparsely populated and even more empty. There is an industrial park a few kilometers away from the center of Ordos, which is a real ghost town at night. Further out of the city center is a big data center, where several Internet giants have placed their cloud computing or other power-consuming departments. In such a big data center, we can usually see rows of cooling fans in other factory buildings, and many big miners set up their mines here. The scale of the mines in industrial parks and big data centers is usually large, and the transportation here is relatively convenient, which is conducive to transporting machines. The power supply is stable and invoices will be issued, although the electricity bill will be slightly expensive.

In addition to Ordos, nearby Wuhai and other places are also popular mining towns for miners. The land here is cheaper, and many mining companies choose to buy land to build factories instead of renting. When the industrial park was unveiled, mining companies and local leaders came on stage to cut the ribbon, and firecrackers and fireworks were set off.

In fact, veteran miners and large-scale mining companies were very cautious in choosing sites during the last round of policy crackdowns. Investing in a mine is not like buying and selling in the secondary market. The liquidity of factories and mining machines is very poor. Stability and safety are one of the most important factors in mining. Policies will only become tighter and tighter, and the space for coal-fired power will become smaller and smaller. Other places with similar situations to Inner Mongolia include Xinjiang, Gansu, and Shaanxi. Everyone is pinning their hopes on Sichuan, Yunnan, and Guizhou. These areas are major hydropower provinces in China and are also the last bases for miners to retreat.

The market reaction was very pessimistic. As soon as the Inner Mongolia policy came out, the computing power of the entire network plummeted and affected the mining pools. The top three domestic mining pools in the world lost more than 20% of their computing power. Overseas mining pools have suffered from domestic mining for a long time, and this scene made people laugh out loud.

The cloud computing power trading platform also announced that it would stop serving Chinese customers. What followed was the continued stampede in the secondary market. Miners with overseas resources immediately left the market after the first shot in Inner Mongolia. They judged that this meeting was of high level. According to past experience, whenever the spirit of a high-level meeting is passed down to the local level for implementation, it will be an overreaction. In short, the local government will definitely use the simplest way to "cut it off". Another part of the miners hold the idea of ​​"mining one day at a time" and "at least stop mining after the flood season", and still hope that the policy can be flexible in dealing with hydropower. Even so, they have begun to clean and pack the machines and prepare for migration. Although waste electricity and abandoned electricity can bring income to the local area, solve some employment problems, and some even pay taxes to the government, these can be ignored in the face of the principle of "stability overrides everything" in the spirit of the meeting.

In information gathering places like "Graphics Card Bar", there are pictures of mining farm clearance and posts about the plummeting prices of graphics cards.

I opened "Xianyu" and searched for hydropower station transfers. I selected a popular item and clicked on the description details.

I tried to communicate with the power station owner whether I could mine, and his response was: We are checking recently.

In addition, under the policy, miners are having a hard time deleveraging. Some miners use Bitcoin as collateral to borrow fiat currency, which they use to invest in mining farms and buy mining machines. Under the death spiral market, they will inevitably be liquidated.

When facing the spirit of the May 21st meeting, many people made the mistake of empiricism (including me). At that time, I saw a lot of arguments such as "here we go again" and "once a year", and arrogantly shared the "94 experience". I did not seriously analyze the current macro and micro economic situation, and underestimated the authorities' understanding of the industry. A large part of the new investors have not experienced the policy storm. The low-cost liquidity built by DeFi has increased the leverage risk to a certain extent, and institutional investors are also potential short-selling forces. In the face of trends, many positive factors will become a reason for stampede.

As for the crackdown on trading, it seems that the exchanges have taken the initiative to respond. First, a derivatives exchange announced that it would stop serving domestic users and restrict domestic mobile phone logins. Some second- and third-tier exchanges also began to close OTC and clear domestic users. The second most powerful was a new round of information blockades, with Weibo and WeChat public accounts clearing a number of top accounts. However, everyone has become accustomed to this kind of living space. Although they wailed, they actually had a tragic sense of collective honor, and then bloggers all sacrificed their own trumpets.

Regarding the last shoe, after Inner Mongolia issued the statement, everyone thought that Sichuan and Yunnan were the last shoes of the mining industry. But yesterday, someone said that China would soon "ban the production and export of mining machines." When I heard this a few weeks ago, I thought it was ridiculous. But now I believe it a little bit, because yesterday the miners held a "self-help meeting" in Chengdu, and the mining companies that had deployed overseas early on sold their futures positions, and they have already sold them until the second quarter of next year.

Everyone’s eyes were actually on the two exchanges O and H. O removed the OTC of its own platform currency (and later restored it), and it was immediately spread as “O closed the OTC.” Despite the complaints of investors, the two exchanges remained silent. It’s just that the executives quietly withdrew from China and began to recruit overseas on a large scale. The rumor was that they would first shut down the leveraged contracts, then the OTC, restrict domestic IPs, and finally clear out existing domestic users. This is also the most logical scenario, and the enthusiastic air force began to photoshop.

In fact, these two exchanges have not existed in China for a long time, but the brands have been operating for too long and have accumulated too much. Although they have repeatedly reiterated that they do not exist in China, and O and H have vigorously cooperated with the authorities to crack down on virtual currency crimes and supported the government to develop blockchain technology, people still do not buy it. In the face of the spirit of the May 21st meeting, it is time for these two companies to cut off the source of funds: withdraw from the domestic market, completely abandon the names of O and H, and vigorously support foreign brands.

This is the best shoe to land. And netizens have even thought of the name of the new platform: (guess it) pictures.

Regarding the question of whether the bull market is still there, many indicators have turned bearish, but the number of participants in the industry today is a hundred times that of a few years ago, and the scale is also expanding exponentially. Although many projects have been close to being cut from their highs, and mainstream coins have also been cut in half, whether it is the internal appeal or the external catalysis that leads to the plunge, it is helpful to eliminate the bubble. In short, this is a bull market that has not completed the process. Is the bull still there? I can't answer that either.

I can only share with you what Wang Xing said in 2013: