Recovery is assessed by hash rate, a term used to measure the algorithmic solving ability of cryptocurrency mining devices. China has long been the center of this industry. An estimated 65-75% of the world’s Bitcoin mining takes place in China.
But after Beijing banned activities that use a lot of electricity and have a negative impact on the environment, miners have been moving to new areas since May. More than 50% of Bitcoin’s hashrate has dropped on the network Global.
As of December 10, data from Blockchain.com shows that the network has fully recovered from that drop. The network’s hashrate increased by about 113% in 5 months.
Bitcoin miners play an important role in the cryptocurrency market because they mine new coins and ensure security. A high hashrate indicates that the cryptocurrency network will be less likely to be disrupted.
The increase in hashrate could bode well for the price of the world’s most popular cryptocurrency, which has fallen 30% in the last month. According to Bitcoin mining engineer Brandon Arvanaghi, China’s ban is a clear “buy” signal.
Bitcoin’s Rapid Recovery
When half of the Bitcoin network “goes dark” in early 2021, many experts say that miners will return to North America. Many predictions about when the network will be restored, but no one thinks that the network will be able to recover by the end of the year.
Texas-based Bitcoin engineer and miner Marshall Long, head of architecture at Rhodium Enterprises, expressed surprise at the speed of this recovery. He suggested that the recovery period could be as early as February, while others suggested it could take another 6 to 12 months.
According to Kevin Zhang of crypto firm Foundry, the rapid recovery of the Bitcoin network is because the US has laid the groundwork to become the new “mecca” for mining. According to data from the Cambridge Center for Alternative Finance, the US is currently the largest country in the world in terms of specialized computers for cryptocurrency mining.
Companies in the US have for years been quietly ramping up their supply of computer equipment and services. They bet that with adequate infrastructure, miners will start working in the US in due course.
As Bitcoin crashed in late 2017 and the broader crypto market entered a prolonged “winter”, there was not much demand for large Bitcoin “farms”. American miners saw the potential and seized the opportunity to build a mining ecosystem in the US.
“Major publicly traded miners have been able to raise capital to make large purchases,” said Mike Colyer, CEO of Foundry. Core Scientific founder Darin Feinstein agrees that the mining infrastructure in the US is growing significantly.
Alex Brammer of Luxor Mining, a crypto-miners association, points out that the capital markets and burgeoning financial instruments surrounding the mining industry also play a large role in the industry’s rapid growth in the region. America.
Covid-19 also plays a certain role
Although the global pandemic has shut down a bunch of economies, the US government’s stimulus money has proven beneficial for US-based coin miners.
Arvanaghi said people are looking for places to put their cash. The need for large-scale investment has never been so great. Many of them have found the potential of Bitcoin mining outside of China.
And that gamble paid off. Data from Cambridge University shows that the US is now the number one destination for Bitcoin miners, overtaking China for the first time.
According to various sources, miners with insufficient resources to relocate have stayed in China. They move the activity underground. Some other miners get their electricity directly from sources such as hydroelectric dams in China’s southern Sichuan province. Other miners split their operations across the country to avoid the attention of the authorities.
Whatever the reason behind Bitcoin’s rapid recovery, Bitcoin miner Alejandro de la Torre, who has spent years mining the cryptocurrency around the world, including in China and the US, told CNBC. that the bigger lesson here is the resilience of the global cryptocurrency mining industry. He believes that any black swan events with Bitcoin mining in the future will no longer be an issue.
References: CNBC, Financial Times