Bitcoin Hashrate Hits 8 Month Low Amid China Crackdown
China’s crackdown on mining operations seems to have negatively impacted the prices of Bitcoin and the broader crypto market.
The crackdown has also led to a drop in Bitcoin’s hashrate and after several mining companies halted their operations in the country, the hashrate had dropped to a new 8-month low.
The peak of Bitcoin’s hashrate was reported in mid-May. The hashrate is currently 46% lower, which illustrates that Bitcoin mining computational horsepower has dropped significantly.
At its peak just six weeks ago, Bitcoin’s hashrate was 171.4 EH/s (quintillion hashes per second), but this has dropped to 91.2 EH/s.
Metrics provided by Bitinfocharts has also shown there is a reduction in mining profitability. The mining profitability stood at $0.449 USD daily per terahash per second at its peak, but this has since dropped to $0.226 currently.
Though this drop in BTC hashrate has reached the lowest level in a period of eighty months, it is close to going below another monthly low reported on November 3 2020, at 90EH/s.
The drop in hashrate shows less competition among Bitcoin miners, which could be attributed to the closure of operations by mining firms in China.
The lower hashrate also indicates that miners now need fewer resources to mine, making the network less secure. Recently, mining firms in Sichuan Province became the victims of the recent crackdown after authorities shut down mining pools.
China Bitcoin Mining Crackdown
There are no shortage of reports about more crackdowns in China. This is evidenced with the crackdown happened in Ya’an City in Sichuan, where authorities ordered local Bitcoin miners to halt their operations.
Sichuan Province is one of the major mining hubs in China. A report in 2019 stated that the province accounted for over half the global hashrate.
Miners opted to set up their operations in the province to leverage its cheap and reliable hydroelectric power.
Sichuan is the recent province to put a halt to mining operations. Yunnan, another mining hub, had a week earlier ordered an investigation into how Bitcoin miners were using illegal electricity. The firms were tapping into cheap energy that was set aside for purposes other than Bitcoin mining.
The drop in Bitcoin hashrate has not just started. Ever since China started enforcing regulations that increased regulatory risk for mining firms, the hashrate has been dropping significantly.
The drop started in early May as the crypto market started crashing. A report by Cointelegraph indicated that the Bitcoin hashrate was departing from China and the region was losing its dominance in Bitcoin mining.
Some analyists expect that the current trend of the dropping hashrate is not expected to stop any time soon. Nic Carter of Castle Island Ventures had earlier predicted that around half of the Bitcoin hashrate would soon depart from China.
Mining firms have been looking to overseas markets as their base of operations. One of the states poised to become a major mining hub is Texas.
Texas has one of the most favorable mining regulations and availability of cheap and renewable energy.
But shutting down miners is not the only way that China is attacking Bitcoin and cryptocurrency. Among the weapons in their arsenal is their blocking of cryptocurrency related internet searches within the country.
These moves by China are likely in preparation for the launch of their Central Bank Digital Currency (CBDC). This launch is currently planned for their hosting of the Olympics in 2022.