In the wake of Beijing’s renewed call for a crackdown on Bitcoin mining on Friday May 21, an investment research engine that provides insights and thematic views across the space has made some projections for the global crypto mining industry. Galaxy Digital Research, which serves Galaxy Digital, the diversified financial services firm for the digital asset, cryptocurrency and blockchain technology industry, and its partners, says it expects restrictions and greater scrutiny in China and not an outright ban. 

The imposition of such government restrictions will see hashrate move primarily to Kazakhstan, Pakistan, Russia, and North America, it notes, adding that it could contribute to pending hashrate drop over the next few weeks as this year’s rainy season begins. The expected drop in the hashrate will be most acute near the end of the month and reliably observed at the beginning of next month. This is based on how hashrate is estimated – it can only be observed accurately with a lag of about seven days and real time estimates are unreliable – and the fact that miners pre-pay for their electricity monthly. The firm states:

“The initial drop in hashrate will likely be followed by at least a partial recovery as miners come back online in the Sichuan valley. Still, a sustained drop in hashrate is likely since it will take a while for cautious miners displaced by regulatory actions to come back online in other jurisdictions. Given the scale of Chinese mining compared to mining in other countries, hosting capacity will represent a significant bottleneck. This represents a reversal from the last year or so, in which the limiting factor in hashrate growth was a severe shortage of machines.”

Talking about machines, the firm indicates in its findings that the Bitmain Antminer S9 still contributes about 31% power to the network’s hashpower – a huge drop from the 75% it held as at 2018 – even as Chinese ASIC resellers are reportedly leaving China due to last week’s events. 

The research comes as a report has it that energy regulators in China’s Sichuan province are likely to follow Inner Mongolia’s footsteps soon, citing an unnamed official. The Inner Mongolia region issued a 8-point measure to combat cryptocurrency mining this week. The official at the Sichuan Energy Regulatory Office of National Energy Administration hinted that Sichuan will soon meet local power companies to gather information on cryptocurrency mining and is not the only province gathering such information.

Several industry-related developments have followed last week’s events. They include a statement posted by BitDeer Group saying it will “block all access to users with mainland Chinese IP addresses, starting from May 26 at 10 p.m. Beijing time” in line with “the regulatory requirements.” Other crypto mining firms withdrawing their services in China include BTC.top mining pools announcing it would no longer provide joint mining services; BitFuFu, a miner part-owned by Bitmain, and Mcoulds, an operator in which OKEx holds a stake.

A statement by mining equipment manufacturer Ebang to Reuters has it that its “mining machines will still be in short supply” overseas even if domestic sales disappear but the impact will be further softened by the fact that “domestic customers will go overseas to mine.” Meanwhile, according to Edward Lu, senior vice president of another Chinese mining machine maker, Canaan, their company is looking at similar markets. “The strategy should be to strenuously develop markets such as Kazakhstan, Canada, and North Europe, where energy resources are abundant and cheap, while regulations are clear and predictable,” Lu told Reuters.