Bitcoin mining has fully recovered after the Chinese ban, turning America into a mining mecca
Bitcoin mining has fully recovered after China’s crypto penetration took more than half of the world’s miners offline almost overnight.
Recovery is measured using hashrate, a term used to describe the processing power of all miners on the Bitcoin network. China has long been the epicenter of this industry, with previous estimates suggesting 65 to 75% of global bitcoin mining takes place there. But after Beijing cracked down on crypto mining in May, more than 50% of Bitcoin’s hashrate disappeared from the Bitcoin network.
As of today (December 11th), data from blockchain.com shows that the network has fully covered these losses. The network’s hashrate has increased by about 113% in 5 months, peaking at 180.5 EH / s.
Bitcoin hashrate fully restored | Source: Blockchain.com
“Bitcoin has successfully resisted a national attack by China that is suppressing it,” said Kevin Zhang, manager of the mining company Foundry.
The upward momentum in the hashrate could bode well for the price of the world’s most popular cryptocurrency, which is down 30% from last month’s high. According to Brandon Arvanaghi, the operator of Meow, a company that helps companies enter the crypto market, China’s ban is a clear buy signal.
But for Arvanaghi, the biggest takeaway from this whole ordeal was the fact that bitcoin mining got through its biggest stress test with some drama.
“The Bitcoin network withstood a superpower attack and came back stronger than ever in just six short months,” he said.
America is becoming a mining Mecca
When half of the Bitcoin network went dark this summer, many experts said miners in North America would be back online. Many predictions have also been made about the schedule to bring the network back to its previous high.
Bitcoin engineer and miner Marshall Long, head of architecture at Rhodium Enterprises, a liquid-cooled bitcoin mining company, told CNBC TV that he was a little surprised at the strong pace of recovery.
“I think we’ll be here in late January, early February next year,” he said. Others believe it will take longer, adding another 6 to 12 months to Long’s prediction.
According to Zhang, the rapid recovery of the Bitcoin network is due to the United States laying the groundwork for it to become the new mecca for mining. Zhang said there is a need in the United States to grow, build infrastructure, and use its energy literacy.
Companies in the US have been quietly expanding their storage capacity for years, betting that miners with adequate infrastructure will start farms in the US in due course.
When bitcoin collapsed in late 2017 and the crypto market entered a multi-year crypto winter, there wasn’t much demand for large bitcoin farms. Miners saw the potential and took the opportunity to build a mining ecosystem in the United States.
“Big miners who go public have been able to raise capital to make big purchases,” said Mike Colyer, CEO of Foundry.
Core Scientific founder Darin Feinstein agrees that the US mining infrastructure is growing rapidly. “We have seen a tremendous increase in mining operations looking to relocate to North America, mostly the United States,” he said.
Companies like Core Scientific continue to build storage space during the crypto winter to ensure new devices can be plugged in.
Alex Brammer of Luxor Mining, a team for advanced miners, points out that the maturing capital markets and financial instruments surrounding mining also play a large role in the fast growing industry in the United States. Brammer said many U.S. operators have been able to expand rapidly as they secure funding using years of profitability data and existing capital as collateral.
Covid also plays an important role
Although the global pandemic has crippled a large number of economies, the state bailout has proven to be a great boon for US miners.
“All the money printing during the pandemic means more capital is needed to deploy it,” explains Arvanaghi. People are looking for places to deposit their money. The appetite for major investments has never been so great. ”
This game of chance was worth it. Cambridge University data shows the US is now the number one target for bitcoin miners, overtaking China for the first time.
A few remain in China
Many miners who do not have the resources to relocate have stayed in China and have moved their operations underground, according to CNBC. Some go through back doors and get electricity directly from sources such as hydropower plants in southern Sichuan Province. Others split their mining operations into much smaller farms across the country that are neglected by the authorities.
Whatever the reason Bitcoin’s recovery was faster than expected, said bitcoin miner Alejandro de la Torre, who for years mined cryptocurrency around the world, including in China and near most here in Austin, Texas , told CNBC that the bigger lesson here is: the resilience of the global mining industry.
“I believe that all of the Black Swan events that could come to Bitcoin mining in the future will not be remarkable events,” said de la Torre.
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