Hash Rate Recovers As Impact of China Mining Shutdown Thins
Market data has indicated that the impact of the widely-reported Chinese crypto miners shutdown following a government crackdown is reversing albeit slowly. The 7-day moving average of Bitcoin’s hash rate has reportedly climbed up to and remained at the 100 exahashes per second (EH/s) level over the past three weeks.
The drop in the price, trade volume and market cap of the top cryptocurrency happened as the Bitcoin network hash rate dropped from April’s peak to the end of June pointing to China’s mining ban as a major factor at the root of it all.
Bitcoin’s hash rate declined by 25%, falling from April’s peak of 166M TH/s to a low of 124M TH/s by the end of June,” according to CoinGecko’s Q2 report. Following the nation-wide banning of Bitcoin mining in China on 21st May 2021, miners started moving out of the country.
As installations are being turned off throughout China, about half the Bitcoin hash rate is being prepared to leave China eventually, Castle Island Ventures founding partner, Nic Carter, told CNBC at the time.
Also, a Galaxy Digital Research report notes that the restrictions and greater scrutiny introduced by China over the period are responsible for the hash rate drop on the Bitcoin network as miners move primarily to Kazakhstan, Pakistan, Russia, and parts of North America.
With the total hash rate now recovering, it confirms reports of some miners resuming operations already while others are expected to join later. One of such examples is BIT Mining, previously known as online sport lottery firm 500.com. Though the company had over 50,000 Bitcoin ASIC miners, it announced this week that 3,819 Bitcoin mining machines with a total hash rate capacity of 172 PH/s have been deployed at data centers in Kazakhstan.
A further 4,033 mining machines with a total hash rate capacity of 121 PH/s have been shipped to data centers in Kazakhstan and are awaiting deployment, it added in the public statement. BIT Mining also reports it started Ethereum mining operations outside of China with hash rate capacity of 86.4 giga hashes per second (GH/s) deployed and an additional 4,713.6 GH/s hash rate capacity expected to be deployed by the end of October 2021.
Meanwhile, the price of Bitcoin broke above $40,000 again on Wednesday July 28, according to Coin Metrics data, a point it last touched on June 16, after holding its monthslong range. The brief surge above $40,000 is coming for the first time in nearly six weeks as sentiment turned bullish.
The market sentiment also changed going by the current Bitcoin Fear and Greed Index being at a neutral (50 to 53 range) since Wednesday up till the time of this writing. The neutral state of the Index is quite a jump from last week’s 21 (extreme fear in the market).
Yet, US-based mining company Luxor notes in its weekly newsletter that Bitcoin’s mining difficulty is likely to increase in August, at “a roughly 1.75% increase” which the report says would be the first positive adjustment since China’s hash rate dropped.
Increased hash rate impacts the mining difficulty leading to longer mining cycles, which in turn results in higher energy bills and lower profit margins for miners to determine their breakeven point. One of China’s top miners, Jiang Zhuoer, recently predicted that Bitcoin will reach $150,000 to $300,000 by the end of 2021.