Bitcoin Hash Rate Nears Full Recovery From Chinese Clampdown Impact
Six months after falling to significantly low levels, the global hash rate of the Bitcoin network has made a full recovery. Following a clampdown on the industry by China, Bitcoin mining companies were forced to shut down operations. This resulted in a collapse of the network’s hash rate, which is the computational power contributed by all the participating nodes in the network.
Bitcoin hash rate dropped to as low as 58.5 EH/s in July 2021, from an all-time high (ATH) of 198.5 EH/s which was achieved in April of the same year. This crash in the Bitcoin hash rate was reflective of China’s contribution to the Bitcoin network until the middle of 2021. Before the clampdown and associated shutting down of mining rigs in China, the country was responsible for over 65% of the total hash rate across the Bitcoin network.
As the government of China went all out to ensure that Bitcoin and cryptocurrency activities were eliminated from within its geographical space, miners closed shop or relocated to more friendly jurisdictions like the United States and nordic regions. This process has taken the better part of the past six months, as the rejuvenation of the Bitcoin network’s hash rate gives evidence that most of the relocated miners, and perhaps even new ones have restarted operations.
China claimed two main reasons for its restriction of Bitcoin and cryptocurrency activities within its geographical space. One is the pursuit of a sanitized financial system where the government and regulators can have a proper oversight function on the transactions happening in the country. This is aimed at curtailing the growing trend of graft, money laundering, and other related vices that were facilitated by the pseudo-anonymous Bitcoin and cryptocurrencies.
The second major reason why China banned Bitcoin activities, especially those related to mining is to enable it to achieve its environmental goals of carbon neutrality. Bitcoin mining is energy-intensive, and the majority of mining farms that were located in China were powered by carbon-based energy. With the mining farms forming a big part of the carbon energy-consuming platforms, their activities had to be stopped.
Many fans of Bitcoin have a varying opinion about the Chinese clampdown on Bitcoin though. The coincidence of the enforcement of this ban with the development of a Central Bank Digital Currency (CBDC) by the Chinese government makes crypto users suggest otherwise. Many of them believe that the actual reason for the clampdown is to eliminate the competition that cryptocurrencies will pose to the upcoming CBDC, the digital yuan.
As mentioned above, many of the miners relocated from China, and in the past six months, most of them have been involved with setting up and reactivating their mining rigs in new locations. As the rigs are being reactivated, and new ones set up, the Bitcoin network hash rate continues to recover.
As of December 8th, 2021, the Bitcoin network hash rate has risen to 186.5 EH/s, nearing the previous ATH. This implies that Bitcoin is almost recovering all the computational power that it lost during the China-induced trying period. This is a positive development for Bitcoin, as increasing hash rate translated to more adoption and improved security of the network. This is a good sign for Bitcoin users, many of whom are looking forward to a surge in price as the markets prepare for 2022.