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Chinese crypto miners are finally back online after a government-led crackdown forced them out of the country in June 2021. Much of the mining capacity moved to North America, Russia, Kazakhstan, among others.
Consequently, the hash rate had jumped about 55% from July when it had hit a two-year low. Bitcoin is also almost hitting $50,000 after losing more than half its value from its April peak.
The Chinese Crackdown
Cryptos are created or “mined” by powerful computers or devices. They use electricity to solve complex mathematical puzzles.
According to estimates by Adam James, a senior editor of OKEx Insights, about 90% of all mining in China fell offline. With China’s closure, any mining operation outside China gained immediately. It is because their mining compensation automatically rises. It works in proportion to its share of the global bitcoin network hash rate. Hashrate, on the other hand, is a measure of miners’ processing power.
After the ban on the mainland, mining plant prices plummeted. In April, a machine that sold approximately 4,000 yuan ($620) was available for only 700-800 yuan by May.
The Chinese manufacturers of crypto mining devices paused their sales soon after. They started searching for “excellent” power in foreign regions with their customers.
Although the price of Bitcoin was 50% below the all-time high throughout much of the summer, plugged-in miners were making tremendous profits. Several mining companies reported that Q2 of this year was the best they had seen.
Difficulty and Hashrate
Bitcoin’s hashrate is now about 85 percent recovered after China banned it earlier this summer. It shows that the crackdown has caused extreme volatility. For example, by July, when the hashrate was at its lowest rate of 84.79 million (TH/s) by 2021, the network had its largest downward change ever, 28 percent.
The hashrate also came from huge North American miners. They most likely were plugging in computers ordered this year and recently got delivered.
The difficulty adjusts every two weeks roughly (or every 2,016 blocks). Depending on the number of miners in the network, the network ratchets it up or down. If more hashrate comes online during one of these two week periods, it will upward adjust the difficulty. That is because more miners produce more calculations than before to locate blocks.
Even if the difficulty of Bitcoin mining is growing, it is a favourable moment for miners. “Look at the price run percentage that Bitcoin has had throughout the previous 12 months. You will see the increase in the hashrate percentage, and it is nowhere in line.”
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Bitcoin is trading at $49,410 at press time, up 4.23% over the past seven days.
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