Bitcoin Hash Rate Rebounds 95.5% Within 6 Weeks of China Exodus
The recovery can also be seen in price, which is up 57% from the late June low, and average Bitcoin transaction fees, which is now aiming for $3.
While Bitcoin price is ranging between $44,000 and $48,000 after recovering from a $29,300 low on July 20, the average fee is now aiming for $3 after keeping around $2 in July and the first half of August.
Average Bitcoin transaction fees peaked at $62.77 per transaction on Apr. 21.
However, besides the lack of activity on the chain as the market calms down with the prices not rallying, the layer 2 solution Lightning Network is the reason behind cheap transactions on the network.
Amidst the increased adoption of Bitcoin this year, we also see massive growth in Lightning Network, which is likely to be partly attributed to low transaction fees on-chain, as per Arcane Research.
The number of channels and nodes on the LN has also increased by 72.3% and 582%, respectively, to 60,208 and 14,137. Given that an estimated 27.8% of all LN channels are private, as per BitMEX Research’s 2020 report, these numbers are likely even higher.
The crypto market has been rallying with Bitcoin making a new all-time high around $65,000 in mid-April, only to experience a decline over the course of the next two months following China cracking down on Bitcoin mining and Tesla CEO Elon Musk raising concerns over its energy usage.
Since bottoming out in late June, the fallout from China’s ban and Musk’s concerns have settled, and the coins have moved from weak hands to strong hands.
This result is not only visible in the price, which is up 57% from June 22 low but can also be seen in the sharp recovery in the network hash rate.
At the end of June, the hash rate fell to about 68 TH/s, a 65.5% decline from mid-May ATH of 197.6 Th/s, according to Bitinfocharts. But since then, we have gained strength to about 133 Th/s, reporting an increase of 95.5%, as the miners that were forced to shut down their operations in China are now coming back online.
Bitcoin network recovering fast.
30-40% increase in HR from the China exodus just 6 weeks ago.
New operations coming online. pic.twitter.com/A4ZDck3bED
— Charles Edwards (@caprioleio) August 17, 2021
Commenting on the rate of growth in the hash rate, Charles Edwards, founder of Capriole Investments, noted,
“Given the China news and regulatory crack down, this growth is very fast. If the china situation had not happened in May, we would expect it to have been higher.”
Once a mining hub, China has moved cryptocurrency miners out of the country and overseas to the USA, Kazakhstan, Quebec, and other areas where electricity is cheap. Texas is one such area whose governor Greg Abbott signed a bill into law in June that puts crypto under commercial law, making it easier for crypto businesses to operate in the state.
“Texas will be the cryptocurrency leader!” tweeted Abbott the same month after the Texas grocery chain H-E-B announced that it would be putting crypto kiosks in some of its stores.
Additionally, 20% of energy in Texas comes from wind power, a much greener alternative to mining in China, where two-thirds of electricity comes from coal, making it attractive to miners.
“We see movement now, we see a lot of interest. We understand why that interest is there. But we just don’t know what the future of bitcoin mining is,” said Kevin Brendle, Dickens county’s top elected official, in an interview. “I think that’s the biggest concern right now is how long, how well the industry will sustain itself.”