Bitcoin Hashrate Tumbles as Authorities Pull Plug on Mining Operations in China
As China increases its already massive efforts to shut down the mining industry within its borders, the hash rates of cryptocurrencies, Bitcoin in particular, continue to take quite a nosedive.
The market value of all cryptocurrencies is currently at about $1.45 trillion, considerably low compared to the $2.6 trillion it reached just last month. And with Bitcoin trading at $32,670, half its record high of almost $65,000 in April, it is impossible to deny the important role Chinese mining pools play or more suitably played in the industry.
Estimates for the distribution of mining power worldwide show that 65 to 75 percent of the world's Bitcoin mining happens in China, majorly in four of its provinces:
- Yunnan
- Sichuan
- Xinjiang
- Inner Mongolia
On June 12, provincial authorities in Yunnan issued a notice declaring an extensive investigation into the reportedly illegal use of electrical power by individuals and companies involved in the mining of Bitcoin.
Information spread via Chinese social media showed that authorities in Sichuan, a mining province located in South West China, ordered the closure of 26 mining sites last week. All power companies within that area were instructed to cut off the electricity supply by Sunday.
Due to the cheap hydropower abundant in these provinces, Sichuan and Yunnan host the largest mining farms in the whole of China. In late 2019, it was reported that Sichuan mining pools were responsible for an estimated half of the global hash rate.
The severity of the crackdown is not limited to these regions. Over the past few months, all crypto mining sites in the coal-rich regions of Inner Mongolia and Qinghai have also been ordered to shut down, and their scant residents encouraged to report illegally running mining farms to the authorities.
A statement released by Chinese Vice Premier Liu He and the State Council's Financial Stability and Development Committee reiterated the need for "tighter regulation" and protection of China’s financial system as the reason behind the stringent crackdown.
Liu is the most highly placed government official to publicly call for the suppression of the growth of Bitcoin, and it is the first time the state council has explicitly targeted crypto mining activities.
The statement released by the Chinese government declares that the country would also clamp down on illegal activities in the securities market and maintain the stability of the stock, bond, and forex markets.
Mining Pools Forced to Leave China
In early May, there were already signs of the Bitcoin hashrate leaving China. Castle Island Ventures partner Nic Carter predicts that over time half the entire Bitcoin hashrate will leave the country.
"It seems like we're going from policy statement to actual implementation in relatively short order," he said.
The truth of his prediction is coming to light even though China's announcements have not been made into concrete policies. In a fashion similar to the California gold rush, miners and traders from China are flocking to North America, to the state of Texas in particular, which appears to be a favorable environment for the mining industry given its abundant supply of low-cost renewable energy.
"We do not want to face every single year, some sort of new ban coming in China," said De La Torre, vice president of the mining pool Poolin, which has its headquarters in Hong Kong. "So we're trying to diversify our global mining hash rate, and that's why we are moving to the United States and Canada."
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