Bitcoin mining has fully recovered from the repressive measures of the Chinese government applied in 2021. Beijing’s bans put more than half the world’s miners out of the game, as the bulk of the activity was concentrated in the Asian giant. The Chinese authorities gave a blow to the table that made fear for the future of the main cryptocurrency and that its price plummeted. A few months later, the miners have managed to ‘turn the tables’.
The reliable proof of this recovery can be seen by looking at the hashrate or rate of total computing power used to solve the calculations that allow the mining of new bitcoin. Until Beijing approved its restrictions, between 65% and 75% of this rate, that is, of the mining activity, was carried out in China. Once the bans were enforced, more than 50% of the bitcoin hashrate disappeared from the global network. Five months later, data from Blockchain.com shows that the network has completely reduced those losses. The hashrate is up 113% in this period.
Behind this recovery is the massive migration of mining activity from China to other countries, especially the US. “Bitcoin resisted the attack of a nation-state that banned mining and the network shrugged its shoulders,” Kevin Zhang of the digital currency company Foundry, who helped introduce more than $ 400 million in currency , tells CNBC. mining equipment in North America. The bet seems to have paid off. Data from the University of Cambridge shows that the US is now the number one destination for bitcoin miners, eclipsing China for the first time. But not everything is as simple as it seems.
Zhang notes that this rapid recovery of the network has occurred because the US has laid the foundations to become a new mecca for mining. “In the US there is a huge appetite for growth, the construction of infrastructure and the use of lost energy,” says the expert. US companies have been silently boosting their accommodation capacity for years, betting that, if the infrastructure is adequate, the miners will settle in the country when the time comes.
Core Scientific founder Darin Feinstein agrees that there has been tremendous growth in mining infrastructure in the US. “We have noticed a massive increase in miners looking to relocate to North America, especially the US,” he explains. Companies like Core Scientific continued to build hosting space during cryptocurrency ‘off hours’ to ensure the ability to connect new equipment.
Alex Brammer of Luxor Mining, a cryptocurrency pool built for advanced miners, notes that the maturing of capital markets and financial instruments around the mining industry have also played an important role in the rapid rise of the industry in the US. . Brammer says that many US operators were able to start expanding rapidly once they secured funding by leveraging a multi-year track record of profitability and existing equity as collateral.
The covid has also played an important role. Although the pandemic crippled economic activity, the government stimulus money turned out to be a boon for American mining companies. “All the money printing during the pandemic meant that more capital had to be deployed,” Arvanaghi emphasizes. “People were looking for places to park their cash. The appetite for large-scale investments has never been greater. Much of that capital went to bitcoin mining operations outside of China.”