Bitcoin (BTC) mining in China has resulted in a significant drop in network hashrate, but industry insiders believe that this opens up incredible opportunities for the broader mining ecosystem.

China has long been a major contributor to the bitcoin mining industry, at times accounting for more than 70% of the world’s leading cryptocurrency hash rate. This was until June 2021, when the Chinese government decided to close some of the world’s largest mining centers.

Sichuan Province in southwest China is rich in hydroelectric power fed by the Yangtze River, the largest river in Asia. With the rise of ASIC mining, the county has become home to some of the world’s largest mining companies in recent years due to favorable electricity rates. But now this is suddenly approaching due to the tightening of the state’s position regarding the recovery of cryptocurrencies and the ecosystem as a whole.

Local media reported that 26 major bitcoin mining centers were forced to close in Sichuan, which has had a major impact on global hash speeds. Bitcoin’s hash rate peaked in mid-May at 171 terahishes per second (TH/s), but dropped to 83 terahes per second (TH/s) on June 23, implying a 50% drop in just one month.

Industry analysts estimate that more than 70% of China’s total mining capacity went out of business in the past week, and that number could rise to more than 90% in the coming weeks.

Kevin Zhang, Vice President of Foundry Services, a mining company, gave an overview of the situation in China on Twitter. Important findings were that operators were given minimal time to assemble things, while most of their electrical infrastructure was incompatible with regulations in other countries.

Bitmain, one of the world’s largest manufacturers of ASIC mining operations, has temporarily postponed the sale of new mining operations to support miners who want to sell used hardware.

first hit
At first glance, the situation appears alarming, but some believe that the resilience of the Bitcoin mining ecosystem will prevail. Regulatory restrictions in China give miners from other countries a unique opportunity to accumulate bitcoin assets.

Daniel Frumkin, a miner at Braiins and Slush Pool, revealed in his correspondence with Cointelegraph the first effects of this latest hash fall:

“The difficulty has diminished in three of the last four adjustments, and the next one could be the biggest downgrade in Bitcoin history. For miners outside of China who are focused on maximizing BTC accumulation, this is a great opportunity given that hash value (BTC/TH/day) is rapidly increasing at the time of anticipation. Everyone has the opposite.”
The researcher also highlighted the fact that the security of the Bitcoin network has not been affected despite the amount of hashing power that has been disrupted in recent weeks, adding, “Chinese miners are moving machines around the world, so the frequency of hashing for geographical distribution is likely to be Much better after 6-12 months than any previous ASIC period.”

However, the impact of mining in China has been felt in the crypto markets as Annabelle Huang, Head of GlobalX at Amber Group, highlighted the recent drop in sales and prices for various cryptocurrencies:

“Following Inner Mongolia and Xinjiang, Sichuan officially halted BTC mining earlier this week, even though hydropower is a greener alternative to coal mining. Combined with the Fed’s warlike sentiment, we have seen a significant drop in the cryptocurrency markets. The shutdown in Sichuan has come as a bit of a surprise and is likely to generate pressure from sellers in the medium term from mining companies, which ramped up operations while driving beef earlier this year.”
Shelf space in perfect condition
The shutdown of Chinese miners has led to some interesting results. First of all, miners are now looking for new places to recover their activities, while some have started selling hardware.

Frumkin noted that the ASIC hardware market will be saturated with widely used hardware for sale, while third-party hosting providers may find their overflow space quickly fills up with miners who want to host ASIC online: time-consuming planning and creating a new mining infrastructure . He went on to add: “All the companies and countries that can quickly build the infrastructure to host thousands of ASICs can become a big business.

Source: CoinTelegraph