BusinessDay

Bitcoin mining market recovers after mass exit from China

The 14-day median hashrate of the bitcoin mining market showed a 42 percent recovery from July lows when half of the hash-power came offline during the Great Migration out of China.

A report by Glassdoor which monitors daily activities on the bitcoin network says the increase in hash-rate is likely a combination of previously obsolete hardware finding a second lease on life, and miners in China successfully relocating, re-establishing, or re-homing their hardware and operations.

Mining is the energy-intense process that both creates new coins and maintains a log of all transactions of existing digital tokens. Hashrate refers to the measure of the computational power per second used when mining cryptocurrencies such as bitcoin. More simply, it is the speed of mining.

Hashrate is measured in units of hash/second, meaning how many calculations per second can be performed. Machines with a high hash power are highly efficient and can process a lot of data in a second.

The hashrate is one of the aspects of the Bitcoin (BTC) network that people look at to measure the protocol’s overall health and growth. The more machines dedicated by honest miners to discovering the next block, the higher the hashrate rises and the harder it becomes for malicious agents to disrupt the network.

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Glassdoor’s daily report found that the 14-day hashrate rose to 128 exahash per second (EH/s), which is approximately 29 percent below the all-time high of 171.2 EH/s recorded in January 2021.

“Competition in the mining market has continuously increased over time, leading the protocol difficulty to consistently rise. This growth has occurred despite the programmatic decline in new BTC issuance with each halving event,” Glassdoor notes.

The cryptocurrency market was thrown into turmoil in May when the Chinese government intensified the clampdown on mining activities in the country. The country was home to around 70 percent of global bitcoin mining power until the clampdown sent the price of bitcoin into a tailspin and caught miners off guard.

Following the clampdown, many miners quickly moved to find new homes in countries such as Kazakhstan, Russia, or North America more receptive to their activities. Texas reportedly received more miners than most US states. This is because Texas has some of the world’s lowest energy prices, and its share of renewables is growing over time, with 20 percent of its power coming from the wind as of 2019. The state also has a deregulated power grid that lets customers choose between power providers.

Equally important is that the political leaders in Texas are very pro-crypto, a staple condition for a miner looking for a kind welcome and cheap energy source. For example, in June, Governor Greg Abbott of Texas signed into law a bill that puts cryptocurrency under commercial law, making it easier for cryptocurrency businesses to operate in the state. In the same month, Abbott boasted in a tweet that Texas will be the cryptocurrency leader after a grocery chain H.E.B announced that it will be putting cryptocurrency kiosks in some of its stores. Also, Tan Parker, a lawmaker in the state assembly authored a recent bill to allow banks in Texas to hold cryptocurrency.

The new mining conditions found in places like Texas, global production constraints on ASIC chips specially designed for manufacturing cryptocurrencies, and the fact that more miners have yet to fully relocate and activate their machines leaving fewer machines have, according to Glassdoor, increased the profitability of active mining businesses.

Miner USD revenue per hash has risen back to July 2019 levels of $380,000 per exahash, making operational miners exceptionally profitable on a historical basis.

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