Is Bitcoin a US conspiracy?

Musk supports the platform, Wall Street is buying like crazy! Is the surge in Bitcoin a US conspiracy?

On March 13, 2021, Bitcoin soared to over $60,000 per coin. Behind the surge in Bitcoin, Musk was enthusiastically supporting it, while Wall Street and Silicon Valley giants were frantically buying it.

For example, the Grayscale Fund that I introduced to you before currently holds more than 650,000 bitcoins, accounting for 3% of the total Bitcoin, with a value of more than US$38 billion. One of the financiers behind the Grayscale Fund is the famous female version of Buffett on Wall Street.

In February 2021, Tesla announced that it had spent $1.5 billion to buy a large amount of Bitcoin. In just over a month, the profit may have reached as high as $1 billion, which exceeded the money Tesla earned from selling cars in the past year.

The madness of Wall Street has made many people wonder, is Bitcoin a conspiracy of the United States against the Eastern superpower? Many media celebrities also took the opportunity to hype that the United States is monopolizing Bitcoin and that we should be wary of the currency war launched by the United States.

As a blockchain player for 8 years, I have heard similar arguments countless times. Bitcoin and blockchain have been developed for so many years, but I still hear such arguments. Now that I am doing financial science popularization, I feel that I have an obligation to explain this to everyone. The data sources of this article include Chainalysis, Cryptocompare, Cambridge University Center for Emerging Finance, BTC.com, Bitcoin.com, etc. Before we officially start, those who haven't paid attention to it should pay attention to it first.

After deciding to do this issue, I looked at the opinions of big Vs on the market about Bitcoin being an American conspiracy, and the summary is:

Wall Street and Silicon Valley in the United States are buying Bitcoin in large quantities, and American giants are supporting Bitcoin in order to attract investors from other countries to enter the sheepfold like sheep, and then harvest them, exchanging the increasingly cheap dollars in their hands for high-quality assets in other countries.

At first glance, it seems to be well-founded and logical, but what I want to tell you is that these people either don't understand and are trying to fool the public, or they know, but for the sake of attracting attention or for some other reasons, they want to distort the truth and tell everyone that Bitcoin is a US conspiracy to create panic. If it's the former, at most they don't understand Bitcoin well enough and are stupid at best. If it's the latter, they are bad.

1

Let me put it this way, anyone who tells you that a country or individual can monopolize Bitcoin is a liar.

In the Bitcoin world, computing power is king. What is computing power? As mentioned before, Bitcoin is actually a big ledger that everyone can keep accounts in, and there are generous rewards for keeping accounts. Currently, whoever can write a page in the ledger can get an income of 6.25 bitcoins. According to the price of 359,310 yuan per bitcoin at 11:15 pm on March 23, 2021, Beijing time, it is 2.25 million yuan. In addition to this reward, there are also other people's transfer fees.

Bookkeeping can bring in a lot of income, so many people want to do it. But how do you decide who will do the bookkeeping?

Therefore, every participant has to solve a math problem. Whoever solves it first will get the right to keep accounts and receive corresponding income.

The characteristic of this math problem is that the forward operation is very simple, but the reverse operation is very difficult, so difficult that you can only try one number at a time.

For example, if there are 500 steamed cakes in each of the two carts of Wuhan University, it is easy to know how many steamed cakes there are in total. But if I only tell you that there are 1,000 steamed cakes in total in the two carts, and ask how many are in each cart, this problem is not simple. If you are unlucky, you may have to guess hundreds of times to get the right answer.

The so-called computing power can be simply understood as the number of times such calculations can be performed per second. The faster the calculation speed, the greater the probability of calculating the result first, and thus the greater the possibility of obtaining the accounting rights of Bitcoin.

With the development of Bitcoin, the computing power of the entire Bitcoin network has continued to grow in recent years. It is currently 1.6*10^20H per second, which is equivalent to 500,000 times the total computing power of the world's TOP500 supercomputers.

Whoever controls 51% of the Bitcoin network's computing power can control Bitcoin. So where is most of Bitcoin's computing power distributed? The answer is China.

According to data from the Cambridge Centre for Alternative Finance (CCAF) in April 2020, although China's share of computing power has declined, it is still as high as over 65%. The United States, which ranks second, only accounts for 7%, which is close to Russia. China is a country with provinces as its own, and the Xinjiang Autonomous Region is equivalent to 5 United States. In terms of Bitcoin computing power, the United States is completely unqualified to talk to China from a position of strength.

In addition, 8 of the world's top 10 mining pools are in China, and one of the other two has a founder from China. The only person in the world who has ever controlled 51% of Bitcoin's computing power is a Chinese. In addition, the world's top 3 mining machine manufacturers are all from China. Because of this, it is often said that China has a monopoly on Bitcoin mining.

Let me ask a counter-question here. If Bitcoin is a conspiracy of the United States, will the United States hand over control of Bitcoin to China?

If Bitcoin is a conspiracy, then according to the logic of those big Vs, it should be Americans who suspect that Bitcoin is a Chinese conspiracy.

2

The second question is, can the United States monopolize Bitcoin by purchasing Bitcoin, and then manipulate the price of Bitcoin to reap profits from all over the world?

In theory, yes. And in theory, anyone can do it.

This is a chart showing the composition of Bitcoin trading volume from 2011 to 2018.

Before 2013, Bitcoin transactions were mainly conducted in US dollars. With the establishment of domestic exchanges, after 2013, RMB dominated Bitcoin transactions, and the pricing power of Bitcoin began to shift to the domestic market. In the red part of the figure, the proportion of RMB transactions has long been above 80%, thus China has also had an unparalleled influence on the Bitcoin market.

It was not until September 4, 2017 that seven ministries issued a ban on the purchase of Bitcoin with RMB in order to prevent financial risks. On September 14, Bitcoin China, a large digital currency exchange in China at the time, announced that it would stop Bitcoin trading, and Bitcoin plummeted 16% that day.

In just half a month, Bitcoin fell from a low of $5,000 to $3,000, a drop of 40%.

Whether it is the over 90% share of transaction volume or the absolute influence of the ban on the price of Bitcoin, they all illustrate the same problem: during this period, the pricing power of Bitcoin belongs to China.

Later, as a large number of domestic exchanges were shut down, the volume of Bitcoin-RMB transactions gradually returned to zero. But please note that after RMB transactions were banned, USDT began to rise.

By the way, USDT is a stablecoin. The so-called stablecoin means that its value is very stable, unlike Bitcoin, which fluctuates greatly. USDT is benchmarked against the US dollar, 1USDT=1 US dollar. You may have questions here. Why is it so troublesome? Can't we just use US dollars?

This is a good question. When you can buy and sell Bitcoin directly with US dollars, it is of course more convenient to use US dollars directly. But what if the US dollar trading of Bitcoin is banned?

Considering that the RMB transaction volume has dropped from over 90% to zero, everyone should know what the rise of USDT means.

As can be seen from the figure, although the proportion of USDT transactions is lower than that of RMB transactions, it still accounts for about 60% of Bitcoin transactions, and as far as I know, the people who like to use USDT transactions the most are Chinese. In other words, so far, the Chinese market still has a strong influence on Bitcoin.

3

To sum up, whether it is the share of Bitcoin computing power or the share of transactions, China was once the undisputed number one.

However, whether in terms of computing power share or transaction share, China's voice is declining.

Careful viewers should remember that I said earlier that although China still dominates Bitcoin mining, China's share of computing power is declining, while the shares of the United States and Russia are increasing.

This is computing power.

In terms of transaction share, after the domestic exchanges were cleared, the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE) in the United States successively launched Bitcoin futures.

The Intercontinental Exchange, the parent company of the New York Stock Exchange, has also begun planning a digital currency exchange.

After entering 2020, Bitcoin began to flow into North American exchanges at an accelerated rate. According to Chainalysis data, in the second week of November 2020, the net inflow of Bitcoin into North American exchanges reached 216,000, an increase of more than 7,000 times compared to the beginning of 2020. In October 2020, East Asian exchanges lost 240,000 Bitcoins.

In other words, in this bull market, North American investors may be the biggest winners.

Someone once gave an example which may not be very appropriate. It was about the cotton market. There was a country, as a producer, which worked hard to produce cotton, but in the end it did not have the right to set prices.

Faced with the same Bitcoin, some people stay away from it, some try to conquer it, some embrace it, and some keep scolding it as a scam, until the amount of scolding reaches 400,000 yuan, and then they realize that there is no chance of being cheated anymore.

Finally, let’s look back at the question at the beginning: Is Bitcoin an American conspiracy?

My answer is, it wasn’t in the past, but it might be in the future.

We once had the Four Great Inventions, we once had Zheng He’s voyages to the West, and we once had Wan Hu’s flying astronauts. However, because we missed the Industrial Revolution, we were eventually forced to sign the Treaty of Nanjing, the Treaty of Shimonoseki, and the Boxer Protocol. We were called the sick man of East Asia and were humiliated that Chinese people and dogs were not allowed to enter. Haven’t we suffered enough from foreigners?

We were once a leader in the blockchain field. Are we going to miss the next wave of technology? Are we going to envy the Americans flying in cyberspace?

If there is a country that can control, monopolize, exploit or destroy Bitcoin, I hope that country is China.

So put aside your prejudices and embrace the future!