Which country can become the next center for Bitcoin mining, what conditions can attract miners, and when to wait for the recovery of the digital mining industry.
There are many cheap sources of electricity in China, which is why China has been a mining hub for several years. As of Q2 2020, according to the University of Cambridge, over 65% of the bitcoin hash rate was concentrated in the country.
This means that more than half of the coins were mined by Chinese miners.
There is no up-to-date information on the network about China’s share in the bitcoin hash rate, as of July 2021.
But most likely it has decreased significantly, and here’s why:
- At the end of May 2021, information appeared that the Chinese authorities were preparing to ban Bitcoin mining in the country.
- Against the background of the release of news about the regulatory pressure on miners in the PRC, the bitcoin hash rate showed the largest drop in history. The changes indicate that many members of the crypto community who have been mining cryptocurrency have disconnected their equipment from the network.
The only way out for Chinese miners who want to continue working despite pressure from the PRC authorities is migration. As a result, the network was flooded with pictures of moving and moving equipment of local members of the crypto community.
The photos indicate that in order to continue working, some Chinese miners are ready to do a lot – including independently transferring their equipment for mining coins across the border.
The secondary market has been flooded with graphics cards, indicating that some Chinese miners have decided to quit their jobs.
- The miners have chosen three main directions of migration.
- Many members of the crypto community have already moved.
- Specialized companies have also chosen to migrate.
Where does the miner go?
Many countries are not averse to taking over the title of a center for mining cryptocurrencies. Here are several areas that turned out to be top-notch for the participants of the PRC crypto community:
- Kazakhstan. Mining has been legalized in the country, while cryptocurrency cannot be used as an analogue of the national currency. Despite a number of bans, local authorities are showing interest in the crypto industry.
Almost immediately after the release of news about pressure on miners in China, many specialized organizations announced their move to Kazakhstan. For example, the parent company of the mining pool BTC.com did this.
- USA. Despite the fact that in some cities in America, including New York, regulatory authorities see mining as a threat to the environment, a number of regions of the country are ready to accept members of the Chinese crypto community.
For example, miners from China are expected in Miami. In mid-June 2021, the city’s mayor, Francis Suarez, invited Chinese miners to America, according to CNBC. The politician announced his readiness to provide members of the crypto community with cheap sources of «green» (environmentally friendly) electricity.
Many experts agreed that the conditions proposed by the United States would provoke the migration of Chinese miners to America.
- Russia. According to Igor Runets, CEO of the largest data center in the CIS for the placement of equipment for energy-intensive and blockchain computing BitRiver, Chinese miners are actively looking at the Russian Federation.
There are other directions that are attractive for miners. For example – Scandinavia. Many members of the crypto community choose a country based on the legality of mining and the cost of electricity.
When will the mining industry recover?
If you look closely at the Bitcoin hashrate graph presented above, you can see that the indicator has already pushed off the local minimum and demonstrated growth. The changes indicate that miners are gradually resuming work.
It is not known when exactly the bitcoin hashrate will return to the highs. Much depends on the speed of migration of miners and the attractiveness of the mining industry.
Important! Some members of the Chinese crypto community began to sell their equipment. This means that even after reconnecting the remaining miners, the bitcoin hash rate will not be able to reach the previous height.
To get back to the highs, the industry needs to attract new entrants. Bitcoin’s creator envisioned such a scenario. Against the background of the hashrate drop, the cryptocurrency network has adjusted the difficulty of mining.
In simple words, after the shutdown of many miners, it became easier to mine bitcoin. Accordingly, market participants who previously found it unprofitable to mine cryptocurrency now have the opportunity to earn money.
Network hashrate moved to growth
Bitcoin miners completed the transfer of business outside of China, which was immediately reflected in the network hashrate.
A rebound in the bitcoin hash rate may indicate the completion of the relocation of miners from China. This is the conclusion reached by the analysts of the Glassnode resource. After China openly began to expel miners from the country, the average daily hash rate of the Bitcoin network fell below 80 exa hashes per second.
However, hash rates have already rolled back above 100 exa hashes per second. This could mean that the miners have completed their move from China, according to Glassnode. At the same time, miners who have not been affected by China’s policies are accumulating bitcoin.
As you can see in the chart above, since July 5, miners have been actively accumulating cryptocurrency, since recalculating the difficulty with the fall of Chinese competition made mining extremely profitable.
The fact that China’s ban on cryptocurrency mining played into the hands of small mining pools was previously reported by analysts from the IntoTheBlock resource. Recall, as experts found out, the mining pools Binance and Huobi have significantly reduced their capacities (by 35% and 63%, respectively).
This played into the hands of small mining pools. For example, small mining pools no longer mine 0.03 blocks per day, but more than 10 blocks (62.5 BTC). Thus, the profitability of small mining pools compared to January increased by more than 30,000%.
However, it seems that this is unlikely to help bitcoin. As Santiment found out, Bitcoin is mired in bearish sentiment among retail investors. So, social skepticism around bitcoin has been persisting for almost a month, reaching a level of -1.16 on the Santiment social mood scale. This is the largest drop in sentiment since July 2019.