Earlier this year, the Chinese government took the momentous move to ban all crypto mining operations within its borders, resulting in a massive exodus of hashing power – 168 exa hashes per second (EH / s) to nearly 86 EH / s on the 23rd, which is a decrease of almost 40% – from China to the surrounding countries.
As a quick refresher, hash rate refers to the total computing power required to acquire a single bitcoin (BTC). In other words, while central banks are issuing fiat currencies, new bitcoin is being made available to miners to solve complex mathematical codes called blocks.
Before the ban, China claimed 65% of the world’s bitcoin hashing power. However, since the move mentioned above, a multitude of mining pool operators have packed their bags and gone to greener pastures. In one example, Canadian mining company Bitfarms found that its revenue was up nearly 30% quarter over quarter in the second quarter of 2021, with the company mining 26% more BTC than the previous quarter.
What exactly is happening?
After a few months of turbulence, BTC’s hash rates seem to have stabilized again, and the numbers seem to be returning to where they were a few months ago. In this regard, data provided by the cryptanalysis firm CryptoQuant shows that the metric at 152 EH / s again appears to have exceeded the 150 exahashes mark, tripling the June 28 level (52 EH / s).
It’s also worth noting that Bitcoin’s average hash rate migrated on the 13. “However, as the metric is now approaching its early June levels, it is estimated that new all-time highs could be registered in the next several months.
Commenting on the issue, Kevin Zhang, vice president of business development at crypto mining company Foundry, told Cointelegraph that despite the perceived recovery, things are still far from “getting back to normal,” added that the 152 EH / s readings were based on a short 24 hour hash rate estimation window where happiness was great across the network and blocks were resolved faster than expected, adding:
“Right now, the 24-hour moving average for the hash rate is back at ~ 130EH / s, which is in line with its three- and seven-day moving averages. BTC’s hash rate is sure to recover and normalize again. However, the majority – if not all – of the great miners in China displaced by the raids have either shipped their mining fleets overseas or are storing them until they can find open hosting capacity. “
He further emphasized that as things stand now, the whole world still relies on readily available infrastructure that can support all of the mined mining units in order to maintain Bitcoin’s hash difficulty.
“It’s certainly exciting to see the hash rate going online and a lot of that comes from new orders that are finally being delivered. We could very well set new all-time highs for network difficulty and hash rate by the end of the year, ”concluded Zhang.
The effects of the Chinese ban will continue
Philip Salter, chief technical officer of Bitcoin mining company Genesis Digital Assets, told Cointelegraph that many Chinese miners have continued to hold out in hopes of an improvement in the situation in China or possibly an attractive opportunity to relocate overseas .
However, he added that most of the major mining sites were bought up during the course of 2021 and there is simply no short-term capacity to deploy 5-8 gigawatts of mining hardware, which basically means that the situation has not really arrived yet, nor is it tangible Resolution. Salter added:
“So the situation is not over yet and I think we will see the effects of the Chinese mining exodus for at least another year. Most of the mining hardware will likely reappear sooner or later and the hash rate will return. But we have to wait and see if this happens slowly over time or if panic-driven hardware sales will depress market prices. “
Similarly, mining company founder and CEO Igor Rugnets told Cointelegraph that while there will be a recovery in hash rates for BTCs – as previously ordered machines continue to be shipped to their international buyers – he still believes that most of the machines that went offline China has not yet found a home abroad due to the raid.
Tech-wise, Rugnets pointed out that Bitcoin’s entire hash rate lost over 60 exahashes of processing power in the weeks after the crackdown. And since most of these mining machines weren’t the latest generation machines, he believed a total of 750,000 machines would have gone offline most likely due to the crackdown.
Eventually, Bitcoin’s hash rate will continue to rise, according to Rugnets, as previously ordered machines continue to be shipped by manufacturers. Additionally, he pointed out that each unit of these new mining machines has a hash rate roughly eight times higher than the older generation machines that previously dominated the Chinese market. “Bitcoin’s hash rate could even hit a new all-time high before the end of the year,” he said.
North American mining companies rise
According to data released by the Cambridge Electricity Index, U.S.-based mining pools began slashing large chunks of BTC’s hash rate as early as June, when China’s local ban wasn’t even fully in place. In that regard, Riot, a U.S.-based mining company, reported revenues of $ 31.5 million for the three-month period, more than 1,500% more than $ 1.9 million in Q2 2020.
The company also reported a 38% increase in the total number of bitcoins it was able to mine compared to the previous quarter, generating 675 BTC from 491 BTC in the first quarter. In fact, Riot recently initiated a 400-megawatt expansion project valued at $ 650 million with Whinstone US, with a total of four additional power plants currently under construction.
Other North American mining companies that have seen amazing gains year-to-date include Marathon (268%), Bitfarms (210%), Riot (126%) and Hut8 (180%). Additionally, data suggests that the aforementioned companies generated 58% more Bitcoin on average in July than they did in June.
Regarding his company’s most recent performance, Fred Thiel, CEO of Marathon Digital Holdings, announced that the company’s revenue increased a whopping 220% (to nearly $ 30 million) in the second quarter of the year compared to the previous quarter. Additionally, the company’s hash rate increased a whopping 196% over the aforementioned time window.
Hence, it will be interesting to see how bitcoin’s hash rate recovery continues from now on, especially as more and more companies around the world increase their manufacturing capabilities.