Bitcoin mining in China roars back despite last year’s cryptocurrency ban (Cryptocurrency: BTC-USD)

Bitcoin mining in China roars back despite last year’s cryptocurrency ban (Cryptocurrency: BTC-USD)

Igor Kutyaev / iStock via Getty Images

While the Chinese government outright banned cryptocurrencies last year, the country has now re-emerged as the world’s second-largest bitcoin (BTC-USD) miner, with the United States remaining top dog, according to a report from Cambridge Center for Alternative Finance (“CCAF”) released this week.

Specifically, the US bitcoin (BTC-USD) minehub accounted for 37.84% of the global hashrate (a measure of computing power – the speed of mining), followed by China (21.11%), Kazakhstan (13.22%), Canada ( 6.48%). %) and Russia (4.66%) according to the report, which referred to data from September 2021 to January 2022.

Keep in mind that the overall hashrate hovers near all-time highs, meaning more bitcoin (BTC-USD) miners become involved in validating transactions on the Proof-of-Work blockchain, ultimately improving network security.

What was behind China’s return to the top?

After Beijing banned bitcoin mining in June 2021, the total hash rate cratered, and China quickly lost its dominant position as its share of global mining capacity fell to zero, the CCAF said. Since then, much of China’s resurgence as a major mining hub is likely attributed to miners who quickly relocated operations abroad (much of the United States), as well as an “increase in secret mining.” It “strongly suggests that significant underground mining has formed in the country, which empirically confirms what industry insiders have long assumed,” the CCAF explained.

“But the sudden resurgence raises issues that can be traced back to methodological trade-offs,” the research report said. “A comeback of this magnitude within a month would seem unlikely given physical constraints, as it takes time to find existing or build new non-traceable hosting facilities on that scale.”

Some argue that the process of extracting bitcoin (BTC-USD), which requires powerful computers, uses too much energy to be considered safe for the environment. For example, in November 2021, the Chinese government pressured state-owned enterprises to stop cryptocurrency mining, citing concerns about the country’s energy supply. That is why renewable BTC mining – the use of clean energy sources – has become a popular industry among the entire mining sector.

Some listed companies that are at least somewhat focused on environmentally friendly crypto production include: Soluna (SLNH), Greenidge Generation (GREE), Argo Blockchain (ARBK), Galaxy Digital (OTCPK: BRPHF), Sphere 3D (ANY), Bitfarms ( BITF), Iris Energy (IREN) and Powerbridge Technologies (PBTS).

The United States dominates bitcoin on all fronts:

Although regulators are struggling with how to implement regulations in the decentralized space, the United States still maintains its position as the world’s leading bitcoin (BTC-USD) mining hub, in addition to surpassing peers in terms of hashrate growth, the report said. Looking at the US bitcoin-mine hash rate distribution at the state level, Georgia (30.76%), Texas (11.22%) and Kentucky (10.93%) account for more than half of the country’s hash rate thanks to “access to relatively cheap electricity, available hosting capacity and the adoption of favorable legislation, “said the CCAF. New York (9.77%), California (7.9%), North Carolina (4.7%) and Washington (4.1%) also experienced significant mining, the CCAF added.

Nevertheless, cryptocurrencies as well as risk assets are more generally rejected by speculators due to a number of macro headwinds, such as rising interest rates, rising inflation, tighter monetary policy and lack of liquidity. Over the last six months, bitcoin (BTC-USD) has been diving around 50%, changed hands to ~ $ 29.2K from Friday afternoon. Bitcoin’s cyclical downturn accelerated after the recent collapse of algorithmic stablecoin TerraUST (UST-USD) and its sister token Luna (LUNA-USD). Take a look at SA contributor Lyn Alden Schwartzer’s analysis of the “cryptocurrency crack.”

In October 2021, SEC Gary Gensler said the United States will not ban crypto.

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