The price of bitcoin plunged in trading over the weekend on news that China has launched a new crackdown on bitcoin mining operations.

Bitcoin dropped below $10,000, to $9,922.61, at 10:20 p.m. EDT before slightly recovering to $10,256.56. as of 11:30 p.m.

The drop below $10,000 is significant because it means bitcoin has dropped to its lowest levels in nearly a month after it broke through $13,000 for the first time since January 2018. That was followed by a roller coaster ride that saw its price primarily trade in a price band of between $11,000 and $12,500.

Usually price movements in bitcoin come down to pure speculation, but the current price plunge is directly related to the Chinese government targeting bitcoin mining operations there.

Bitcoin mining is the processing of transactions on the bitcoin blockchain. Miners use computing power to process transactions and in return are awarded bitcoin for their efforts. In its early days, bitcoin mining could be done on a home computer, but the process of mining was designed to get harder with time and in 2019 it requires dedicated custom-chip-powered hardware. Notably, that processing power requires a significant sum of electricity and this is ostensibly the reason for China’s crackdown on bitcoin mining.

According to The Guardian, police in Zhenjiang, Jiangsu confiscated about 4,000 mining devices from an alleged illegal bitcoin mining operation. The mining operation is said to have stolen about RMB 20 million ($2.91 million) in electricity in the process. “In value, it is the largest case in the amount of electricity stolen that Jiangsu has cracked since the founding of new China, and a rare sight in the whole country,” Zhenjiang police said in a statement.

A one-off raid by itself shouldn’t be cause for broader alarm, but it comes as China has been discussing a ban on bitcoin mining. In April, China’s National Development and Reform Commission published a proposal, not yet law in China, that would ban bitcoin and other cryptocurrency mining on environmental grounds. The proposal specifically highlighted that bitcoin mining not only wasted energy but as a consequence polluted the environment as well.

China has form when it comes to crackdowns on cryptocurrency and related offerings, having banned both cryptocurrency exchanges and initial coin offerings in 2017.

The Middle Kingdom accounts for about 74% of bitcoin’s network hashrate — that is, the process of mining. Taking China’s bitcoin miners out of the market could, in the long-term, cause bitcoin’s price to rise since there would be less processing power dedicated to mining, hence increasing rewards for miners. However, the mere fact that the majority of bitcoin’s current miners could be banned has caused uncertainty in the market and resulted in bitcoin’s price dropping.

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