Hash Rate Rebounds as Chinese Bitcoin Miners Resume Operations
Hash rate is an important part of crypto mining, and determines the speed at which a cryptocurrency is mined. After taking a plunge in May in the wake of a mining ban in China, the mining hash rate for the flagship cryptocurrency is now back at the former levels or close to it. China’s ban on Bitcoin mining was first issued in May, and extended to June and July, instigating a mass exodus of miners from the country.
Moving to other regions with favorable conditions for Bitcoin mining- including cheap electricity costs and low tax charges- Chinese Bitcoin miners have not resumed their activities. Countries like the US, Canada, Russia, Iran and Asian counterparts, Kazakhstan, Kyrgyzstan have been receiving these miners in large numbers.
85% Recovery on Hash Rate
According to reports, the hash rate for Bitcoin has rebounded by 85%, a reflection of how deeply China’s ban affected the hash rate. In July, mining difficulty had fallen by 28%, the biggest drop ever in the history of Bitcoin mining. Similarly, the hash rate was at the lowest of the year at 84.79 million terahashes (TH/s). However, the recovery is not solely attributed to miners’ resumption, but the setting up of new rigs by US-based mining firms.
Until the ban, China held 75% out of the global hash rate. Following the transit of miners from the Asian giants, China’s share dropped to 46%. Obviously, a decrease in China’s hash rate translated to an increase in other regions. The US’ share doubled; Canada as well.
While China has moved on like the ban never happened and even going ahead to cut power supply from miners who use hydroelectricity to power their rigs, experts have highlighted the dangers of the ban. Bloomberg strategist, Mike McGlone predicted that this could significantly affect its second-largest economy.
China’s dislike for cryptocurrency dates back to the advent of Bitcoin, which the government has declared to be a tool that endorses money laundering and the financing of illegal activities. Till date, the Chinese government laments over how cryptocurrencies are incapable of control. Owing to their lack of control, China has shut the door out on crypto usage and adoption within its country.
China Introduces e-CNY or Digital Yuan as Crypto Alternative
Alternatively, China is testing a central bank digital currency (CBDC) backed by blockchain technology. The CBDC named e-CNY has passed the first trial phase after pooling billions of dollars in transaction volume. Due to its pace, China may be the first to publicly issue a CBDC.
Meanwhile, China may be in the dire straits of inflation which its ban on cryptocurrencies has not been able to address. China uses the dollar as a base currency to which the Yuan is pegged, a move which it made two decades ago during the 1998 Asian financial crisis.
Currently, inflation caused by excessive cash printing is making the dollar lose value, which affects China by extension. As such, China might have made the greatest mistake outlawing Bitcoin and other crypto assets.
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