Earlier this year, the Chinese government took the momentous step to ban any crypto mining operations based within its borders, causing a massive exodus of hashing power -- 168 exa hashes per second (EH/s) to nearly 86 EH/s as of June 23, representing a drop of nearly 40% -- from China to surrounding countries.
As a quick refresher, the hash rate refers to the total computational power needed to acquire a single Bitcoin (BTC). This means that central banks may issue fiat currencies while miners receive new Bitcoin to solve complex mathematical codes called blocks.
China claimed 65% of the total Bitcoin hashing capacity in the world before the ban. However, many mining pool operators have left China for better pastures since the ban. In one example, Canadian mining firm Bitfarms noted that its revenue had increased by nearly 30% quarter-over-quarter in Q2 2021, with the company mining 26% more BTC than it had done so in comparison to the previous quarter.
What is the real story?
After months of turmoil, BTC hash rate levels seem to have stabilized again. Numbers are now back to the same level they were a few months back. CryptoQuant's data shows that the metric has surpassed the 150 Exahashes mark at 152/s. This is three times the level it was at on June 28th (52 EH/s).
It's also worth noting that Bitcoin's average hashrate reached a record high of 197.6 EH/s on May 13. However, the number plummeted by more than 65% as a result of the "great migration" in China.
Kevin Zhang, Foundry's vice president of business development, shared his views on the matter with Cointelegraph. He said that even though there has been some recovery, things are far from "back to normal." He also explained that the 152 EH/s reading was calculated using a 24-hour hash rate estimate window. This was where luck was high and blocks were solved quicker than expected.
"Right now the 24-hour moving average for hashrate is hovering around 130EH/s. This is consistent with its three- and 7-day moving averages. The BTC hash rate is definitely recovering and returning to normal. However, the majority of large-scale Chinese miners who were forced to flee China's crackdowns have either sent their fleets abroad or stored them in warehousing until they find hosting space.
He also highlighted the fact that the world's infrastructure is not sufficient to support all the displaced mining units necessary for Bitcoin's continued difficulty.
"It is certainly exciting to see hashrate come online, and a lot is coming from new orders being delivered. Zhang concluded by saying that we could easily set new records for network difficulty, hash rate, and both by the end of this year.
The effects of China's ban on imports will continue to linger
Cointelegraph spoke with Philip Salter, chief techniel for Bitcoin mining company Genesis Digital Assets. He said that many Chinese miners are still waiting for a better situation in China, or to wait for an opportunity to move overseas.
He said that many of the large mining sites had been purchased by 2021 and that there was simply not enough short-term capacity to deploy 5-8 gigawatts worth of mining hardware. This basically means that the situation isn't yet resolved. Salter said:
"So, the situation doesn't look over and I believe we'll continue to see the effects of China’s mining exodus for at most another year. Most likely, most of the mining hardware will come back sooner or later. The hash rate will also return. We will have to wait to see if this will occur slowly or if panic-fueled hardware sales will cause market prices to plummet.
Cointelegraph was also told by BitRiver's founder and CEO, Igor Rugnets, that although a rebound in BTCs haveh rate figures is inevitable -- previously ordered machines continue being delivered to international buyers -- he still believes most of the machines that were shut down in China because of the crackdown will still find a home overseas.
Rugnets made a technical point by pointing out that Bitcoin's total hashrate lost more than 60 exahashes in the weeks after the crackdown. Rugnets believes that 750,000 of these mining machines are likely to have gone offline due to the crackdown, even though they were not all the most recent-generation machines.
Rugnets believes that Bitcoin's hashrate will continue to increase as machines from the past are still being shipped by manufacturers. He also pointed out that each unit of the new mining machines has a eight-fold higher hash rate than older machines. He said that Bitcoin's hashrate may set a new record before the year ends.
North American mining companies increase their efforts
As per data released by the Cambridge Electricity Index, United States-based mining pools have started sweeping up large portions of BTC's hash rate even before June, a time when China's local ban hadn't even come into full effect. In this regard, Riot, a U.S.-based mining firm, reported $31.5 million in mining-related revenues for the three-month period -- up over 1,500% from its Q2 2020 revenue of $1.9 million.
According to the firm, there was also a 38% increase of Bitcoins it could mine in comparison with Q1. It generated 675 BTC as opposed to 491 BTC in Q1. In fact, Riot recently initiated a $650-million 400 megawatt expansion project with Whinstone US, with a total of four additional power production facilities currently under construction.
Marathon (268%), Bitfarms (220%), Riot (126%), and Hut8 (180%) are other North American mining companies that have seen remarkable year-to-date growth. Data suggests that these companies were able generate 58% more Bitcoin in July than June.
Commenting on his company's recent performance, Marathon Digital Holdings CEO Fred Thiel revealed that during the second quarter of the year, the firm's revenue rose by a sizable 220% (to nearly $30 million) in comparison with the previous quarter. The company's hashrate also increased by 196% during the same time period.
It will be interesting to watch how Bitcoin's hashrate recovery progresses from now on, especially as more firms around the world increase their production capacity.