By Landon Manning
Although the worldwide bitcoin mining hash rate, which determines the rate at which new bitcoin are produced, dropped dramatically after China’s recent crackdowns on the industry, new data suggests that it is on the brink of complete recovery.
In May 2021, The People’s Republic of China implemented a new strategy in its recurring attempts to curtail bitcoin mining and use in the country: targeting not only exchanges, but also the many bitcoin mining businesses that were located in the country. With Chinese miners taking advantage of a number of cheap electricity sources, from things like coal in the outer provinces to hydroelectricity in the Sichuan region, China was indisputably the world hotspot for mining activity, producing more than half of the worldwide hash rate. But with the space suddenly snuffed out all at once, it left the international bitcoin community asking what would be next,
One of the immediate next moves was a mad rush by mining firms and mining equipment from China to other areas with similar power capacities, with varying levels of success. For example, many firms immediately began packing up for Kazakhstan, which has low electricity costs due to its coal deposits, like many of China’s outer provinces. However, with recent squeezes in the coal-based power supply exacerbated by this new influx of miners, the government has begun its own crackdown on the fledgling industry.
Ultimately, the majority of the bitcoin mining industry moved to countries with significantly more developed electrical grids, including the United States and Russia. Of these two, the U.S. is by far the largest producer under the new post-China paradigm, with Russia having not yet caught up with the amount of mining rapidly brought to Kazakhstan.
However, despite some of these setbacks, the worldwide hash rate of bitcoin has recovered. After positive signs of mining recovery began to receive notice in early December, by the eighth of the month it was reported in the Financial Times that bitcoin’s hash rate was almost on par with its pre-crackdown levels and on course to surpass new records in the next several days. Although the majority of worldwide bitcoin mining went to several key targets, like the United States, it also found homes in countries like Norway, Iceland, Canada and others, which played key roles in this recovery, often with renewable energy sources.
Although the total rate of bitcoin production would undoubtedly be higher if the Chinese market was still open, there have been silver linings to this setback: The new miners filling the gap in the last several months have generally been using much newer and more efficient equipment, helping to mitigate bitcoin’s environmental impact.
In other words, the bitcoin mining community that has emerged from this setback seems fierce, revitalized and ready to keep expanding. As the hash rate will reach new all-time highs by the end of 2021, it’s anyone’s guess to see how much farther bitcoin will go in 2022.
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