BTC Hashrate is Down 50%—Chinese Miners Are Going Elsewhere

Bitcoin hashrate is down by more than 13% compared to yesterday, and down by nearly 50% compared to earlier this month, according to data by YCharts. Distinctly, China’s crackdown on crypto mining is in full swing as the country has been extending its prohibitive policy day by day.

Chinese miners, who are being “thrown under the bus”, are left with no other choice than an exodus. However, an exodus would be anything but seamless. Some U.S. states are striving to be friendly and absorb these displaced miners, though the 25% U.S. tariff on Chinese goods along with the costs of migrating overseas doesn’t make this a convenient option.

China’s Crackdown Outcomes — So Far

Reportedly, mining pools that have a substantial part of their mining operations located in China are currently contributing less than 50% of what they were contributing to Bitcoin hashrate on May 15. Of these mining pools, 1THash and BTC.TOP have suffered the most, respectively falling more than 96% and 94% each.

According to Kevin Zhang, vice president of business development at Foundry, Chinese miners are “not even in the mood to drink anymore.” Zhang, who used a lengthy thread on Twitter to update on China’s crackdown on Bitcoin mining, asserted that indeed the sentiment is “gotta go” for mining in China.

As per some estimations, approximately 70% of Bitcoin mining capacity in China has already halted its operations. Moreover, this figure is estimated to reach 90% by the end of this month. 

For some miners in Kangding and Sichuan provinces, who have installed their mining facility on the power plants, the crackdown extends to beyond halting mining operations. Reportedly, these miners have been instructed to remove all of their operating infrastructures including racks and containers within one to two weeks.

Various Suitable Alternatives, But an Exodus Won’t be Seamless

Among all places, some U.S. states are offering to be a favorable home to the displaced Chinese miners. For instance, with its abundance of renewable energy (solar and wind), its unregulated market, and its crypto-friendly political stance, Texas makes a nearly perfect alternative for miners who can make the trip.

In addition, Miami Mayor Francis Suarez is also striving to make the city an attractive place for Bitcoin miners. Miami has an unlimited supply of low-cost nuclear energy, yet Suarez asserted that he is consulting with the Florida Power & Light Company to further reduce the price of electricity. 

Aside from US countries, Central Asian countries like Kazakhstan are also successful in drawing crypto miners. For one, Canaan, one of the world’s largest cryptocurrency-mining rig producers, has recently launched its mining operation in Kazakhstan. 

While there are numerous suitable alternatives for Chinese miners, a big move abroad doesn’t sound simple. First off, with hosting capacities outside China reportedly being oversubscribed, miners will be obliged to deal with higher costs in other countries.

Furthermore, the 25% U.S. tariff on Chinese goods along with the costs of migrating overseas would present a major cost issue for Chinese miners. On top of this, Chinese miners can’t be even confident that they will be able to sell their mining rigs.

It may appear quite an opportunity for resellers to scoop up all the discounted mining rigs and sell them in western countries, though there is a major problem: most of the rigs won’t be up to code for western countries — e.g., not UL or CE certified.

Iran Extends Crackdown on Bitcoin Mining

Looking back at history, Iran has been specifically welcoming towards cryptocurrencies. In recent years, the country accepted crypto mining, offering cheap power and requiring miners to sell their bitcoins to the central bank. According to Elliptic, Iran accounts for 4.5% of the world’s Bitcoin mining capacity.

However, the Iranian government has been recently exhibiting hostile behavior towards cryptocurrencies. In late May, the country declared a four-month ban on Bitcoin mining citing energy concerns. And a couple of days ago, the Iranian Interior Ministry suspended the Iran Blockchain Association.

More recently, on June 22, Iranian police seized 7,000 crypto mining computers at an unauthorized crypto farm. While Iran’s crypto mining capacity is not even comparable to China, yet the country plays an important role in really decentralizing the Bitcoin network. 

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Whatever Does Not Kill Bitcoin, Will Make it Stronger

China has been extremely hostile to the crypto world. The country used to be the world’s crypto mining hub and maintained a large share of the crypto market—which is why news from China is so influential—yet it is throwing out crypto businesses. However, if we zoom out, this can be very bullish for Bitcoin and the entire crypto market in numerous ways.

First, the Bitcoin hashrate has dropped significantly. While this means that the Bitcoin network is now weaker, it also means that mining difficulty has dropped and mining is now more profitable. In recent years, the discussion on whether Bitcoin mining is profitable or not has been very hot, with some concluding that Bitcoin mining is not profitable anymore.

However, with this notable drop in mining difficulty, we can expect a horde of new miners to enter the market. This will not only enhance the Bitcoin hashrate again, but also help spread decentralization which has been trivial for several years now — because of China’s substantial share of the market.

Second, China will lose its influence. The fact that one single country hosts around 75% of Bitcoin mining has always been a weakness for the crypto market. Indeed, this centralization spoils one of the most important premises of Bitcoin: decentralization.

Altogether, China’s intensive crackdown on cryptocurrencies is definitely unpleasant, but it is extremely promising in the long term. China has a controlling government; it wants to control the internet, the news, and, now with its CBDC, its citizens’ transactions. Therefore, it was for sure that, one day or another, the country would ban cryptocurrencies — which are clearly against the Communist party’s restrictive stance.

After China, which country will become the world’s crypto hub? Let us know what you think in the comments below.