Coindesk Logo

Bitcoin Mining Hashrate Drops to 1-Year Low; Difficulty Set for 25% Decrease

Bitcoin Mining Hashrate Drops to 1-Year Low; Difficulty Set for 25% Decrease

Bitcoin Mining Hashrate Drops to 1-Year Low; Difficulty Set for 25% Decrease

Concerns about the extent of the China crackdown have contributed to the past months' decline in bitcoin's price to about $34,200.

Concerns about the extent of the China crackdown have contributed to the past months' decline in bitcoin's price to about $34,200.

Concerns about the extent of the China crackdown have contributed to the past months' decline in bitcoin's price to about $34,200.

AccessTimeIconJun 28, 2021, 7:14 PM
Updated Aug 21, 2021, 6:56 PM

Presented By Icon

Election 2024 coverage presented by

Stand with crypto

China’s crackdown on cryptocurrencies has been a blow for bitcoin mining companies and pools based in the country, with some hit harder than others. However, for active miners in other parts of the world, it might be good news.  

Bitcoin’s mean hashrate – a measure of the computational power working to secure the blockchain network – fell to 94 EH/s on Sunday, the lowest since May 2020, according to data from Glassnode. Meanwhile, the bitcoin mining difficulty could see a 25% drop at the next reset, likely on July 3, based on Glassnode's estimates

A downward adjustment of that size could be the largest in the Bitcoin network's 12-year history, according to Compass Mining.

With the hash power declining and most Chinese miners going offline, the business should become easier and potentially more profitable for miners that are still active, according to Sam Doctor, chief strategy officer at BitOoda, a digital asset financial services platform. 

As hashrate declined, the number of daily bitcoin earned for each unit of computational power likely increased, which “certainly would imply more bitcoin” for active miners, according to Doctor. The dollar-equivalent value of the proceeds is harder to predict given the cryptocurrency's notorious price volatility.

Concerns about the extent of the China crackdown have contributed to the past months' decline in bitcoin's price to about $34,200 now, from an all-time high near $65,000 in early April.

Miner migration

The fall in the bitcoin mining hash power is likely to continue, according to BitOoda, which predicts the target hashrate could drop further to 85 EH/s at the subsequent difficulty reset on July 19 or July 20. 

“We believe it would take several quarters for the infrastructure deployment to be complete," according to BitOoda. "As a result, hashrate will likely be below our prior forecasts for the next ~10 quarters.”  

When will the fall come to an end? It may depend on how the crypto mining industry responds to China's crackdown. 

With Chinese miners looking for new places to host mining rigs, North America has attracted enormous interest due to its comparatively lower geopolitical risks, large-scale utility networks and emphasis on environmental, social, and corporate governance, according to Dave Perrill, CEO of Computer North, a cryptocurrency mining colocation company. 

“We're seeing a ton of inbound requests from Chinese-based mining companies that are looking to relocate to North America and are looking to do it urgently,” said Perrill. “We're receiving over a hundred megawatts of requests per day."  

“I think in the course of the next 12 to 18 months, over 50% of the hashrate will be in North America,” according to Perrill. 

However, the migration takes time, and infrastructure could be a bottleneck.

“We'll see a lot of machines hitting the North American shores and some are just going to be offline for a while until the hosting infrastructure can catch up," Perrill said.

According to BitOoda's Doctor, “the concern is that not every miner in China could find a hosting site outside of China.”

Many hosting sites face a shortage of substations and transformers to pair with bitcoin mining rigs coming from China, Doctor noted. 

“There aren’t that many sites that are ready for development,” Doctor said.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information have been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. CoinDesk has adopted a set of principles aimed at ensuring the integrity, editorial independence and freedom from bias of its publications. CoinDesk is part of the Bullish group, which owns and invests in digital asset businesses and digital assets. CoinDesk employees, including journalists, may receive Bullish group equity-based compensation. Bullish was incubated by technology investor Block.one.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.