- The Chinese hashrate dropped by 50% in the past month as miners seek to relocate their business.
- Miners are looking westwards to places like the US, Kazakhstan, or Russia to establish their new mining facilities.
- BTC expenditures have increased as miners require additional funds to relocate.
- After the Chinese exodus, low energy expenditure is no longer predominant in creating a sustainable business model.
The Chinese decision to shut down Bitcoin operations continues as reports highlight 90% of all Chinese mining operations will be closed. Chinese mining accounted for 65% to 70% of the global hashrate, and since the ban’s enforcement, centralized hashrate control in the region steadily decreased. The overall global hashrate contracted by 29.6% since its all-time high in May.
Mining is Seeking a Way Out
According to Blockchain data, the global mining hashrate is continuing to decrease, reaching a six-month low of 110 TH/s. In addition, miners seek to relocate their mining equipment after Chinese authorities have started enforcing their mining ban across the country. It is reported that the biggest Chinese mining pools, AntPool and F2Pool, have seen their hashrate decrease by 58%, respectively 56%.
Mining has also experienced a decline despite some reports that the exodus will make Bitcoin mining “more accessible.” The global difficulty adjusted 25 trillion to approximately 19 trillion, with a 16.9% decline expected to occur in the upcoming weeks. However, as network latency occurs, the network is expected to generate additional mismatches in block validations, seeing the miner’s rewards decrease.
The Bitcoin network will continue to suffer in the near term, as mining hardware will be shut down until relocation is final. In November 2020, most of the Chinese mining hardware relocated to find “cheaper energy,” causing the hashrate to plummet. It is reported that the hashrate decreased by 40%. While the 2020 and 2021 event dynamics are somewhat comparable, they exhibit similarities in how the hashrate can restore itself.
On the Flipside
- Previous occurrences have shown that mining hashrates and difficulty will restore to normal.
- China focuses on CBDC digital currency to enforce control and surveillance by displacing Bitcoin as the preferred digital means of payment.
- Fenghua International Transportation is helping relocate mining machines outside China.
- The hashrate decrease is not directly correlated to Bitcoin’s price decrease as the network is not becoming weaker.
Saved by the West
According to Nic Carter, miners are no longer incentivized by low energy costs. Political stability and regulatory cryptocurrency measures are currently the pillars for miner’s decision-making. Mining relocation is already ongoing, as social media posts highlight mining operators are shipping their equipment to places like Kazakhstan, Russia, or The US.
Following the enforcement of the Chinese mining ban, new opportunities emerged for western countries to facilitate access to crypto mining. El Salvador announced plans for Volcanic mining, Texas governor Greg Abbott, welcomed Bitcoin miners. Additionally, Foundry USA, a mining pool subsidiary of Digital Currency Group, accounted for a 15% hashrate increase.
Mining opportunities are limited, with only a handful of countries catering to high electrical demands. Still, the Chinese mining exodus is not as impactful as initially thought. What’s more, shifting the core of the hashrate outside China will decrease concerns of mining centralization.
China Still Has a High Carbon Footprint
Chinese authorities argue their decision to ban mining as a way to decrease carbon emissions. However, China’s dependency on coal mining is contradicting their actions. A report emphasized the country plans on increasing its coal mining, adding three times more power plants in 2020.
Furthermore, Bitcoin mining facilitates “capital outflow,” according to a report. Erik Wilgenhof Plante, a Maltese COO, highlighted “local authorities can make deals with miners, often without the knowledge of the central government,” which also adds another dimension to the ban. Chinese authorities want to decrease corruption and enhance control over the capital that goes outside of China. To that end, they used the mining ban as a way to combat corruption.
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