By Shelly Melancon (Switzerland)
Bitcoin mining had fully recovered following China’s crypto crackdown earlier this year when more than half of the world’s miners were effectively shut down overnight.
While bitcoin mining has recovered, the price of bitcoin remains below the $50,000 mark. Bitcoin was trading at $48,566.70 at the time of writing this article.
The recovery uses hash rate, a measure that quantifies the processing power of all miners on the bitcoin network. Blockchain.com data paints a detailed picture of the recovery and the last plunge.
According to the figure above, the network’s hash rate has increased by almost 115 percent during the last five months. China had long been the heart of the cryptocurrency mining industry, accounting for between 65 and 75 percent of global bitcoin mining.
However, more than half of bitcoin’s hash rate has been removed from the global network since Beijing effectively halted cryptocurrency mining in May.
Bitcoin Miners In China Consumed Significant Coal Energy
According to Rystad Electricity, the Chinese crackdown happened due to the excessive use of energy from coal extracts by Bitcoin miners. In numbers, the extraction amounted to 63% of the energy used in crypto mining in the country.
Although China’s crackdown on Bitcoin (BTC) mining operations has resulted in a significant decline in the network’s hash rate, industry participants feel the crackdown presents an incredible opportunity for the broader mining ecosystem.
Chinese Bitcoin Farms
China has historically been a significant contributor to the Bitcoin mining industry, accounting for more than 70% of the world’s hash rate at times. That remained true until June 2021, when China’s government announced plans to close several of the world’s largest mining centers.
Sichuan, China’s southwestern province, has abundant hydroelectric power due to its proximity to Asia’s greatest river, the Yangtze. Due to the emergence of ASIC mining, the region has become home to some of the world’s most extensive mining operations in recent years, owing to its cheap electricity prices. However, that is coming to an abrupt end as the country’s attitude on cryptocurrency mining and the ecosystem, in general, continues to harden.
According to local media reports, 26 significant Bitcoin mining hubs shut down abruptly in Sichuan, resulting in a massive drop in the worldwide hash rate. At the time, the hash rate peaked at 171 terahashes per second (TH/s). The high hash rate recorded in June dropped significantly in June. The drop was equivalent to a 50% reduction.
Industry analysts estimate that more than 70% of China’s total mining capacity closed down last week.
Hard Times for Chinese Bitcoin Farms
In a Twitter thread, Kevin Zhang, vice president of Foundry Services — a mining infrastructure company — presented an outline of the Chinese situation. Operators did not receive vacation notices from the regulators. Also, setting up their mining rigs was not easy in other places or neighboring countries.
At the time, the Chinese authorities argued that Bitcoin mining, which consumes a large amount of electricity, jeopardized people’s lives and harmed President Xi Jinping’s environmental aspirations.
The authorities closed down 26 key Bitcoin mining centers in Sichuan during the crackdown. Industry analysts believe that more than 70% of China’s total mining capacity went offline during a single week in June.
U.S. Bitcoin Miners Taking Over
Tony Zhang, a Chief Strategist at OptionsPlay, thinks that Bitcoin mining recovered almost immediately due to the United States laying the groundwork to become a new mining destination. According to Zhang, the United States has a “great desire for growth, infrastructure development, and exploiting stranded energy.”
He stated that for years, corporations in the United States secretly increased their hosting capacity.
When bitcoin fell in late 2017, and the broader market entered a multi-year crypto winter, there was little demand for large bitcoin farms. Mining companies in the U.S. took advantage of the mining gap left open by their Asian contemporaries. Now, the U.S. mining businesses have taken over the mining space.
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