China’s crackdown on cryptocurrencies has been a blow for bitcoin mining companies and pools based in the country, with some hit harder than others. However, for active miners in other parts of the world, it might be good news.
Bitcoin’s mean hashrate – a measure of the computational power working to secure the blockchain network – fell to 94 EH/s on Sunday, the lowest since May 2020, according to data from Glassnode. Meanwhile, the bitcoin mining difficulty could see a 25% drop at the next reset, likely on July 3, based on Glassnode's estimates.
A downward adjustment of that size could be the largest in the Bitcoin network's 12-year history, according to Compass Mining.
With the hash power declining and most Chinese miners going offline, the business should become easier and potentially more profitable for miners that are still active, according to Sam Doctor, chief strategy officer at BitOoda, a digital asset financial services platform.
As hashrate declined, the number of daily bitcoin earned for each unit of computational power likely increased, which “certainly would imply more bitcoin” for active miners, according to Doctor. The dollar-equivalent value of the proceeds is harder to predict given the cryptocurrency's notorious price volatility.
Concerns about the extent of the China crackdown have contributed to the past months' decline in bitcoin's price to about $34,200 now, from an all-time high near $65,000 in early April.
The fall in the bitcoin mining hash power is likely to continue, according to BitOoda, which predicts the target hashrate could drop further to 85 EH/s at the subsequent difficulty reset on July 19 or July 20.
“We believe it would take several quarters for the infrastructure deployment to be complete," according to BitOoda. "As a result, hashrate will likely be below our prior forecasts for the next ~10 quarters.”
When will the fall come to an end? It may depend on how the crypto mining industry responds to China's crackdown.
With Chinese miners looking for new places to host mining rigs, North America has attracted enormous interest due to its comparatively lower geopolitical risks, large-scale utility networks and emphasis on environmental, social, and corporate governance, according to Dave Perrill, CEO of Computer North, a cryptocurrency mining colocation company.
“We're seeing a ton of inbound requests from Chinese-based mining companies that are looking to relocate to North America and are looking to do it urgently,” said Perrill. “We're receiving over a hundred megawatts of requests per day."
“I think in the course of the next 12 to 18 months, over 50% of the hashrate will be in North America,” according to Perrill.
However, the migration takes time, and infrastructure could be a bottleneck.
“We'll see a lot of machines hitting the North American shores and some are just going to be offline for a while until the hosting infrastructure can catch up," Perrill said.
According to BitOoda's Doctor, “the concern is that not every miner in China could find a hosting site outside of China.”
Many hosting sites face a shortage of substations and transformers to pair with bitcoin mining rigs coming from China, Doctor noted.
“There aren’t that many sites that are ready for development,” Doctor said.