Shocker! According to the latest CBECI update, China’s control over Bitcoin mining was already dwindling. The Cambridge Bitcoin Electricity Consumption Index shows that, and much more, it “provides an up-to-date estimate of the daily electricity usage on the Bitcoin network”. However, China is the headline. The government’s recent ban on Bitcoin mining left the world speechless, and this feels like another piece of work to solve that mystery.
But doesn’t quite fit. According to Arcane Research, the CBECI numbers say this:
China’s share of the total Bitcoin mining power has dropped from 75.5% in September 2019 to 46% in April 2021 – before restrictions were even imposed on Chinese miners. That number is much lower than the older 65% estimate.
Related reading | Why China’s crackdown on Bitcoin may be just beginning
That’s a big drop. Why did China’s miners lose so much ground before the ban? Has the Chinese government shut down the machines it supposedly owns? Why should they do this? Is all of this missing an obvious explanation for all of this? It’s also very interesting that the CBECI shows that the United States and Kazakhstan grew tremendously before the ban.
BTC price chart on Bitstamp | Source: BTC/USD on TradingView.com
Bitcoin mining in the US and Kazakhstan
Arcane Research analyzed the numbers and apparently:
Over the same period, the United States’ share of the total Bitcoin hashrate rose from 4.1% to 16.8%, making it the second largest Bitcoin mining location.
It is followed by Kazakhstan with an almost six-fold increase in the hashrate share – from just 1.4% in September 2019 to 8.2% in April 2021.
That’s curious. After the state ban went into effect and miners shut down their machines, we worried that the Bitcoin hash rate could get into a death spiral. The migration of the great miners was on its way, so guess who the predicted big winners were:
Tons of mining machines are currently traveling to their new home. There are reports of a huge operation in Kazhakstan, a neighboring state of China. There are also rumors that equipment and personnel have already settled in Texas. The US state is pushing to become a bitcoin mining capital, and it seems the efforts have already borne fruit.
Remember, however, that everything the CBECI numbers show happened before the ban.
Is there anything we miss?
Country share of global Bitcoin hash rate | Source: Arcane Research
How do you get the CBECI numbers?
The Cambridge Bitcoin Electricity Consumption Index explains the methodology they use:
The underlying technical-economic model is based on a bottom-up approach, originally developed by Marc Bevand in 2017, which uses the profitability threshold of various types of mining equipment as a starting point.
Since the exact power consumption cannot be determined, the CBECI provides a hypothetical range consisting of a hypothetical lower limit (floor) and a hypothetical upper limit (ceiling). Within this range, a Best Guess estimate is calculated to provide a more realistic number that approximates Bitcoin’s actual power consumption.
So it is a very laborious, reasoned guess. However, it is based on real data and a number of estimates. Does it tell us anything about the strange results they got? Does the data tell a story we miss?
Related reading | How China Bitcoin FUD Lowers the Cost of Making BTC
Last month we made a theory about the Chinese government trying to get rid of small hydropower plants. The whole situation is confusing, so we asked ourselves the following questions:
It is possible that the government is trying to get rid of these plants. That would explain the tone of the article, it seems like it is trying to get investors to stay away from these hydroelectric plants. With that in mind, China’s ban on Bitcoin mining could only be part of an even bigger game. They are serious and methodically mix things up there.
What could your endgame be? Is China just trying to go carbon neutral and repair the original flow of rivers? Or is something else at play here?
Everything the CBECI shows seems to relate to the answer to all of these questions. However, at least one piece is missing. The secret remains.
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