Bitcoin network hashrate hits all-time high after China crypto ban
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Chad Harris, Whinstone’s CEO, takes CNBC along on a tour to the biggest bitcoin mine in North America.
BitcoinThe Chinese crypto crackdown, which nearly took half the world’s miners offline overnight in January earlier this year, has led to mining completely recovering.
A measure of recovery can be made by looking at the hashrate. It’s an industry term that describes the computing power of every bitcoin miner. China was the center of this sector for a long time, according to past estimates. 65% to 75% of the world’s bitcoin mining happened there. But after Beijing effectively banished the country’s cryptocurrency miners in May, more than 50% of bitcoin’s hashrate dropped off the global network.
As of Friday, data from Blockchain.com shows that the network has completely pared back those loses. The network’s hashrate is up about 113% in five months.
“Bitcoin withstood a nation-state attack of China actually banning mining, and the network shrugged it off,” said Kevin Zhang of digital currency company Foundry, which helped bring over $400 million of mining equipment into North America.
The upward momentum in hashrate may bode well for the price of the world’s most popular cryptocurrency, which is down 30% over the last month. China’s ban was a clear “buy” signal, just as it was with Google and Facebook before it, accordingTo bitcoin mining engineer Brandon Arvanaghi, who now runs Meow, a company that enables corporate treasury participation in crypto markets.
Arvanaghi believes that the best thing about this whole ordeal was the simple fact that bitcoin mining passed its most stressful test with minimal drama.
“The Bitcoin network survived an attack from a powerful superpower, and came out stronger than before six months later. It is impossible to argue that it should be banned by nations. again?” He said.
Bitcoin’s quick recovery
Many experts predicted that North American miners would be back online after half of the bitcoin network was shut down in spring. There were many predictions about when the network would be restored to its original high.
CNBC did not speak to anyone who believed that CNBC would recover by the end the year.
Texas bitcoin miner and engineer Marshall Long — who is the head of architecture at Rhodium Enterprises, a fully integrated bitcoin miner using liquid-cooled infrastructure — tells CNBC he was a bit surprised by the pace of its recovery.
He said, “I thought we’d be there sometime in February or January.” Some others thought it would take six to twelve extra months, adding another six-to-12 months to Long’s forecast.
Zhang claims that the U.S. helped to create a new mining hub, which led to the rapid recovery of the bitcoin network. Zhang claims that the United States has a huge appetite for growth. Building infrastructure and using stranded energy.”
Companies in the U.S. have been quietly boosting its hosting capacity for years, gambling that if adequate infrastructure were in place, miners would set up shop in the U.S. when the time was right.
After bitcoin’s crash in 2017 and the market went into a long crypto winter, large-scale bitcoin farms were not much in demand. U.S.-based mining companies saw this opportunity and grabbed the chance to use cheap money to expand the American mining community.
Mike Colyer, Foundry CEO, stated, “The large, publicly-traded miners were able raise capital to make big purchases.”
Darin Feinstein, founder of Core Scientific, says that there’s been an increase in American mining infrastructure. Feinstein said, “We have seen a huge uptake in North American mining operations that are looking to move to North America. Most of them in the U.S.”
Core Scientific in North America, which is a crypto mining company, kept expanding its hosting capacity throughout crypto winter so that they could plug in more gear.
Alex Brammer from Luxor Mining points out the importance of maturing capital markets in order to support the growth of advanced mining companies. Brammer also notes that many American miners were able expand quickly once they had secured funding by using a long track record in profitability and other capital as collateral.
Covid was also a part of the story.
Even though the worldwide pandemic caused large economic disruptions, the stimulus money provided by the U.S. government was a welcome boon to U.S.-based mining companies.
Arvanaghi explained that “all the money printed during the pandemic means more capital had to be used.”
“People wanted to find safe and secure places for their cash. Large-scale investments were in demand like never before. Arvanaghi stated that much of it likely went to Bitcoin mining operations located outside China.
It paid off. Data from Cambridge UniversityIt is evident that U.S. is now the number one destination for bitcoin minersChina was surpassed by.
However, the reality may be more complicated than it appears.
Multiple sources claim that many of the miners didn’t have enough money to move and stayed in China. They moved their businesses underground. Others went “behind-the-meter”, drawing power from hydro dams located in Sichuan’s southern province. Some divided their mining operations into smaller farms that were easier to see by authorities.
Whatever the cause behind bitcoin’s faster-than-expected bounce-back, bitcoin miner Alejandro de la Torre — who has spent years minting crypto all over the world, including in China and most recently in Austin, Texas — tells CNBC that the bigger lesson here is the resilience of the global mining industry.
“I believe any potential black swan events related to Bitcoin mining in the future” de la Torre declared.
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