Why Bitcoin miners are fleeing China

During this 2021, many Bitcoin miners literally fled China. 

Bitcoin miner on the run from China

Until last year, including the first months of 2021, many Bitcoin mining machines were physically located in China, so much so that it was estimated that a very significant percentage of the hashrate was located in the Asian country. 

However, it should be remembered that the data regarding the hashrate are only estimates, therefore inaccurate, and that it is extremely difficult to know precisely where all the machines are located, since many miners are actually pools made up of hundreds or thousands of miners who put in common their computing power from different parts of the world. 

Therefore, while not having precise data, it was hypothesized that about half of Bitcoin’s hashrate could somehow be linked directly to China, with an even greater percentage that could be indirectly linked to it. 

These percentages seem to have been confirmed by the collapse of the Bitcoin hashrate following the Chinese squeeze against miners. 

According to CoinWarz estimates, for example, 191 Ehash / s were reached on 9 May, while on 28 June they dropped to 69. 

This reduction was certainly partly due to the drop in the price of Bitcoin, which went from about $ 58,000 on May 9 to about $ 34,000 on June 28, given that the more the value of BTC is reduced, the less it is worth keeping the mining machines running. . 

But why has there been a 64% collapse of Bitcoin’s hashrate in a month and a half since May 9 , albeit partially recovered? 

In addition to the significant drop in the price of Bitcoin, there is also another reason: many Chinese miners have shut down their machines. 

Indeed, to tell the truth they have completely suspended their mining activities 

In fact, as early as April the Chinese government had made it clear that it did not intend to further tolerate the enormous energy consumption due to mining.

Consumption of Bitcoin mining

Bitcoin mining consumes a lot of electricity, currently estimated at around 152 TWh per year . 

Since a large part of the hashrate was located in China, it means that a large part of this consumption was carried out in the Asian country. 

Furthermore, only some Chinese miners used renewable sources , such as hydroelectricity, while others used electricity produced for example with coal. 

The Chinese government really dislikes decentralized projects like Bitcoin, which it cannot control and which is trying to pave the way for its central bank digital currency, although this cannot possibly be an alternative to Bitcoin. 

The Chinese government’s ban, the consequences 

Basically, the Chinese government, starting from May, has issued a sort of ban aimed at those who mined cryptocurrencies. 

Given that the power of the Chinese government in the country is considerable , being an undemocratic nation, many miners have preferred not to go looking for further trouble and have first turned off the machines and then indefinitely suspended the cryptocurrency mining activity 

It is not certain that the purchase cost of the machines they were using had already been amortized, moreover these machines age quickly, so they must be exploited as long as they are competitive. 

The only possible solution was to move elsewhere, in order to be able to continue the mining activity. Suffice it to say that neighboring Kazakhstan can count on enormous oil reserves with which low-cost electricity is produced. 

Others have fled to Canada or the US , where a real surge in Bitcoin mining has occurred 

Starting from the beginning of July, according to CoinWarz estimates, the hashrate has started to grow again, so much so that recently it has even temporarily risen above 150 Ehash / s, and then repositioned itself around 130. 

The current level is still around 30% below the peak of 9 May, but in line with the levels of the end of last year, for example. However, the bulk of the losses, from this point of view, has already been recovered, and in the event of a further rise in the price of bitcoin it is possible that it may also return relatively shortly to the pre-collapse maximum levels. 

It is possible that some Chinese miners are actually continuing to mine, given that among the major pools there are still several that appear to be based in China, but it is undeniable that the current situation is decidedly different from that of the first months of the year. in progress. 

Although it is not possible to establish with certainty how many Chinese miners have suspended their activities indefinitely, or how many have moved abroad, it is nevertheless possible to imagine that the situation in China will hardly return to what it was before in the short term.