China is no longer the world’s top bitcoin mining market after a months-long campaign to push out cryptocurrency mining saw related activity fall below levels seen in the United States, Russia and Kazakhstan, the latest data from the Cambridge Bitcoin Electricity Consumption Index (CBECI) show.
Until recently, China had been the world’s top mining market since CBECI started recording data in September 2019 on each country’s hash rate, a unit of measure for the bitcoin network’s processing power for verifying transactions and mining new cryptocurrency tokens. But mining operations had started concentrating in the country years before because of its cheap electricity, and it became home to some of the world’s top mining pools and exchanges.
China was still the world’s top location for bitcoin mining as recently as June, when it contributed to 34.3 per cent of the global hash rate, down from a peak of 65 per cent in April 2020. CBECI’s latest data for July and August shows China at 0 per cent.
The US is now the world’s largest miner in terms of hash rate, taking up 35.4 per cent in August, followed by Kazakhstan and Russia with 18.1 and 11.2 per cent, respectively, according to the CBECI.
In May, the Chinese State Council’s Financial Stability and Development Committee, chaired by Vice-Premier Liu He, vowed to crack down on bitcoin mining. In the months that followed, the country’s biggest cryptocurrency mining hubs – including Inner Mongolia, Sichuan, and Xinjiang – joined the campaign to shut down mining farms.
Following the crackdown, many miners sought to move to North America and Central Asia. Disassembling and moving the large server arrays proved to be a costly undertaking, but the CBECI data suggests many have successfully transitioned to new locations.
July and August saw a “bounceback” of 20 per cent in the global bitcoin hash rate, “suggesting that some Chinese mining equipment has been successfully redeployed overseas”, said Michel Rauchs, digital assets lead at the Cambridge Centre for Alternative Finance, which publishes the CBECI.
The “immediate effect” of Beijing’s crackdown was “a 38 per cent drop in the global network hash rate in June 2021, which corresponds roughly to China’s share of hash rate before the clampdown, suggesting that Chinese miners ceased operations simultaneously”, Rauchs said.
The downturn will “be fully recovered soon”, he added, with most of the gain coming from the US, Russia and Kazakhstan.
Bitcoin’s price swings over the last few months have reflected the temporary mining capacity shortage. After peaking above US$50,000 in April, prices fell below US$40,000 from May to July before picking back up. The price has hovered around US$55,000 this week.
Meanwhile, major cryptocurrency miners continue to move operations out of China. SparkPool, one of the world’s largest Ethereum mining pools, terminated services for all users late last month. NBMiner, which develops management software for graphics cards, also said it would no longer offer tech support for users in China.
The crackdown has spread to e-commerce, as well. Alibaba Group Holding, owner of the South China Morning Post, announced last month that it has banned the sale of cryptocurrency mining equipment on its global wholesale platform Alibaba.com.
Rauchs noted that reduced bitcoin mining in China may not be a bad thing. Experts have previously warned that a high concentration of the hash rate in China could give the country an outsize influence on the network.
China’s reduced mining activity “can be considered a positive development for network security and the decentralised principles of Bitcoin”, Rauchs said.