US overtakes China in Bitcoin mining after crypto ban
The leading share of the global Bitcoin network hashrate now sits in the US
The United States has taken pole position in Bitcoin mining following China’s crackdown, data updates from the Bitcoin Electricity Consumption Index (CBECI) at the Cambridge Centre for Alternative Finance (CCAF) showed.
The CCAF reported that the leading share of the global Bitcoin network hashrate is now in the US. The global hashrate share at the end of August 2021 of 35.4%, is up from 16.8% at the end of April.
“The effect of the Chinese crackdown is an increased geographic distribution of hashrate across the world, which can be considered a positive development for network security and the decentralised principles of Bitcoin,” explained CCAF.
Many Chinese miners have now migrated to Hong Kong, which could lead to the former British colony becoming a crypto hub, attracting digital firms and investors.
In the hashrate index, Kazakhstan followed with 18.1%, up from 8.2% at the end of April, and the Russian Federation with 11%, after a previous 6.8% at the end of April.
“This confirms the hashrate trajectory identified in the last update to the end of April 2021, which showed those three countries were already gaining market share before the crackdown in China”, said the CCAF.
Eastern Asia crypto market declining
Further studies from Chainalysis showed that in June 2021, Eastern Asia crypto market was already declining having received $590.9bn worth of cryptocurrencies between July 2020 and June 2021. This represents only 14% of all activity over the period, while they were 31% of the previous year.
"China-based mining pools have historically been an important source of liquidity for the services to which they send newly mined cryptocurrency, which also tends to be those popular in China and East Asia generally,” said Chainalysis researchers.
“One significant knock-on effect of China’s mining crackdown is that many of these services appear to not be receiving cryptocurrency they otherwise would have,” they added.
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The China ban effect
According to CCAF, the immediate effect of the government-mandated ban on crypto mining in China was a 38% drop in global network hashrate in June 2021.
This corresponds roughly to China’s share of hashrate before the clampdown, suggesting that Chinese miners ceased operations simultaneously.
“New data reported by partnering mining pools BTC.com, Poolin, ViaBTC, and Foundry confirms this observation: declared mining operations in mainland China have effectively dropped to zero, from a high of 75.53% of the world’s total Bitcoin mining in September 2019 when this data was first recorded,” said CCAF.
Migration of Chinese miners
According to CCAF, the initial 38% drop in global hashrate in June was partially offset by a 20% ‘bounceback’ over July and August. This suggests that some Chinese mining equipment has been successfully redeployed overseas.
“As of early October, the hashrate trajectory is indicating that all, or nearly all, of that June downturn, would be fully recovered soon,” CCAF said.
“If the August data updates are an indication for the future, then that recovery will likely be further distributed predominantly between the largest share gainers: the US, Kazakhstan and the Russian Federation,” they added.
According to the index, outside of the top three, the next largest hashrate shares are Canada with 9.5%, Ireland with 4.7%, Malaysia with 4.6%, Germany with 4.5% and Iran with 3.1%.
“Shares for Ireland and Germany are likely due to a growing number of miners rerouting through those countries via VPNs or proxy servers, rather than growing mining activity for which there is little or no evidence,” they said.