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  • Bitcoin mining charts a new path following the crackdown on mining activities in China.
  • Miner revenue is expected to rise toward the end of 2021 as miners seek alternative bases.

The cryptocurrency market went through a tailspin amid an organized crackdown on mining firms in China. The Asian economic giant has for a long time been at the center of mining the flagship cryptocurrency. However, the Cambridge Centre for Alternative Finance (CCAF) data shows that China’s mining share had dwindled from 75.5% in September 2019 to roughly 46% in April 2021.

Bitcoin Mining Exodus From China

Sichuan Province was once the most prominent cryptocurrency mining base in China. However, the base was forced to close after authorities stopped mining activities in the area. The crackdown was organized throughout the vast country, with most firms forced to seek alternative countries to set up shop.

The push on the ban is geared toward reducing carbon dioxide emissions from coal power plants. It is estimated that 90% of China’sChina’s Bitcoin mining capacity has already shut down with miners moving to countries like Kazakhstan. According to Shentu Qingchun, CEO of Shenzhen-based blockchain company BankLedger:

 More than 90 percent of Bitcoin mining capacity, or one-third of the global crypto network’s processing power, will be suspended in the short term. As a result, Chinese miners must form alliances to migrate overseas, to places such as North America and Russia.

The Impact Of Bitcoin Mining Crackdown

As mining collapses in China, new global giants seem to be emerging. As mentioned, CCAF research found out that China’s dominance in Bitcoin mining has tumbled in the last three months, with Kazakhstan rising to become the third-largest Bitcoin mining nation globally while investors focus on buying cryptocurrency.

Realize that miners are rewarded for creating new Bitcoins. Nevertheless, the process requires an enormous amount of energy to solve complex mathematical questions. Heavy mining rigs (computers) are installed in plants and work around the clock validating tractions on the network. Therefore, enormous amounts of electric power are needed globally to produce this computing power. In turn, Bitcoin mining contributes significantly to emissions, explaining the thinking behind the crackdown in China.

Miners in China have been on the move as per the findings of CCAF. A move that saw global mining power plunge while China’sChina’s “disappearing overnight, suggesting that miners and their equipment are on the move.”

The rise of Kazakhstan emanates from its endowment in fossil fuels. While the growth has been drastic because of the departure from China, the country has seen its share of global mining power rise gradually from 1.4% in September 2019 to 8.2% by April.

Bitcoin Mining Adjustment Following China Crackdown

The latest data astonishingly shows that Bitcoin mining became less challenging in the wake of China’s purge. As the market attuned to miners going dark in the Asian nation, the algorithm also adjusted, allowing productivity levels to skyrocket.

According to CNBC, this adjustment took effect in early July, suggesting that miners still in the business are getting more money despite the capitulation following the crash from $65,000 to consolidating between $30,000 and $40,000, allowing holders to looking into other cryptocurrencies likely to explode. Brandon Arvanaghi, a mining engineer, believes that the adjustment “will be a revenue party for miners.” In other words, “they suddenly own a meaningfully larger piece of the pie, meaning they earn more bitcoin every day.”

The crackdown caused a squeeze in mining power, meaning that fewer people are mining the bellwether cryptocurrency. A block that would take roughly ten minutes to mine currently takes an average of 14 to 19 minutes.

Bitcoin mining difficulty
Bitcoin mining difficulty

Note that Bitcoin is set to recalibrate every 2,016 blocks, or if you like, every two weeks. This adjustment changes the difficulty level for mining. Hence, the code made it nearly 28% less difficult to mine Bitcoin at the beginning of July, whereby the block time was restored to the optimum ten minutes window. Mike Colyer, CEO Foundry, a crypto company, reckons that:

It is a self-regulating market that does not require any outside committee to determine what to do. This is a very powerful concept.

Bitcoin Revenues and Breakeven

Kevin Zhang, former Chief Mining Officer at Greenridge Generation, explains that Bitcoin miners (both public and private) operate in the same market with similar economics. Hence, the adjustment of difficulty times leads to a general uptick in revenue.

Bitcoin mining revenue after difficulty adjustment
Bitcoin mining revenue after difficulty adjustment

If power costs are held at a fixed constant, Zhang says that revenue would range at $29 per day for miners using the latest-generation Bitmain miner. Before the change, revenues ranged at $22 per day. It is worth noting that miner revenues are fixed but fluctuate with time as difficulty adjustments occur. Intriguingly, miner revenues only fell 17% since Bitcoin price all-time high of $65,000 while the price crashed by nearly half.

Bitcoin Mining In A Six-month range

The drop in Bitcoin price and the crackdown in China saw the hashrate nosedive from April’sApril’s peak of $179.32 TH/s to a yearly low of 86.2 TH/s. Meanwhile, the mining power is on the rise and holds at 100.77 TH/S.

Bitcoin mining hashrate
Bitcoin mining hashrate

Although a gradual hashrate growth is being witnessed, it is not easy to predict where it could go in a month or even six months because China could reverse its stand on mining activities, making the squeeze short-term.

Meanwhile, crypto experts believe that if China does not go back on the table and reverse the crackdown, it may take roughly six months for the displaced equipment to start operations. The journey of finding a new home for miners is not an easy one, although countries in South America offering set up bases due to affordable electricity.

On the other hand, mining revenue is expected to continue to rise for the rest of 2021. The surplus mining gear will likely lie idle as miners seek alternatives in different countries.

Capital at risk