Bitcoin Hash Rate Share Records a Shift after 70% of China’s Mining Capacity Goes Offline

Bitcoin’s hash rate continues to fall, hitting 87.3 TH/s on Tuesday, which was last seen in late October. The hash rate has now tumbled 50% from the mid-May peak.

As of writing, the hash rate is at 98.7 Th/s, according to Bitinfocharts.

Ethereum’s hash rate has also declined, but it’s not as severe as Bitcoin. The price of bitcoin mining machines has also declined by about 40% from their highest point, affected by the drop in the crypto’s price.

This crash in hash rate has been due to China’s crackdown on cryptocurrency mining leading to an estimated 70% of Bitcoin mining capacity in China going offline, which is expected to be closer to 90% by the end of this month, said Kevin Zhang, VP at Foundry, a subsidiary of Barry Silbert’s Digital Currency Group, the parent company of Grayscale Investments.

“Sentiment is obviously quite dreary,” and the reality is China is no more the crypto mining hub, he said.

But miners are now moving overseas, and “Chinese miners have been quick to mobilize.” Already they have been expanding their operations outside of China; a process accelerated with the Inner Mongolia ban earlier this year.

This only means that the dominance of China-based bitcoin miners which used to hold the vast majority of bitcoin's network’s mining capacity is fading and fast.

The top Chinese bitcoin mining pools are already seeing a big drop in their hash rate share while Foundry is recording a big increase, as per The Block data.

Besides the crackdown, the global chip shortage and a shift for mining hardware also contribute to this.

Despite this, there hasn't been another surge in the amount of BTC sent by miners to the cryptocurrency exchanges for selling ever since peaking on May 19th. Meanwhile, the amount of BTC held on Binance has climbed to new highs over the last month, currently at above 570K BTC, far more than any other exchange.

“Although there are many factors at play, the increase is likely at least partially caused by investors moving their BTC off of Chinese exchanges and on to Binance, which is not officially headquartered in mainland China,” said Coin Metrics.

As we reported, China has been intensifying its measures against crypto trading as the central bank announced on Monday that banks and financial institutions, including AliPay, are prohibited from providing their services to crypto providers and users.

In short, the reason why China has taken a firmer stance on cryptocurrencies is because as the importance of the financial system increases, serving the real economy as its foundation and promotes a virtuous cycle and healthy development of the economy and finance, https://t.co/LfXJKBYnON

— Sαlly W 嘎知 (@sallywang666) June 23, 2021

According to Sino Global Capital, this is a “PBOC means to limit the options for the general public to enter the market for speculative trading” by banning one method of China RMB on/off-ramp. This move could be made to prevent unauthorized capital flight and money laundering.

Interestingly, amidst all this, AliPay rolled out a new feature where users can buy non-fungible tokens (NFTs) within the app using RMB.