Bitcoin’s hashrate has fallen to its lowest levels since early November. This should come as no surprise because a large percentage of Bitcoin mining comes from China, and because of the cryptocurrency crackdown by Chinese authorities, mining operations in China are starting to decline.
All you need to know about Bitcoin hashrate
Bitcoin’s network hashrate is a measure of the computational horsepower of the flagship cryptocurrency. Hashrate is a key security metric. The more hashing (computing) power in the network, the greater its security and its overall resistance to attack.
Although Bitcoin’s exact hashing power is unknown, it is possible to estimate it from the number of blocks being mined and the current block difficulty. The hashrate has slumped 46% since its peak level in mid-May. Bitcoin hashrate is currently 91.2 EH/s (quintillion hashes per second), close to half of its 171.4 EH/s high posted less than six weeks ago.
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Bitinfocharts has reported a drop in mining profitability which peaked at $0.449 per day, per terahash per second to $0.226.
A higher hash rate means greater competition among miners to validate new blocks, also increasing the scale of resources required to perform a 51% attack and thus making the network more secure. The slump in hashrate and mining profitability as mentioned earlier is due to the ongoing crackdown from Chinese authorities on Bitcoin mining facilities across the country. Over the weekend, major mining pools in China’s Sichuan province were shut down and images were shared across social media.
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On June 18, authorities in Ya’an City, a prefecture-level city in the western part of Sichuan, ordered local Bitcoin mining operations to shut down. In late 2019, CoinShares estimated that Sichuan hosted more than half of the global hash rate, attracting miners with its cheap and seasonally abundant hydropower.
What they are saying
According to a CNBC report, Castle Island Ventures partner, Nic Carter noted Bitcoin’s hashrate was dropping, speculating, “it appears likely that installations are being turned off throughout the country.” Carter predicted that at least half of Bitcoin’s entire hashrate will leave China over time.
What this means
The drop in the hashrate of Bitcoin is a very important indicator for security. The higher the hashing rate, the greater the security and vice versa. The hashing rate has fallen to levels not seen since November 2020 last year. The hashrate has been far lower in the past and there have been no concerns of possible hacking.
It is believed that the drop in the hashrate is temporary and miners in China will be looking to relocate their equipment and offices to other countries that are “Miner friendly.” An example will be North America, particularly the state of Texas.
Over time, the state has become one of the top destinations for what has been dubbed the “great mining migration” due to favourable legislation and an abundance of low-cost renewable energy. Another place Chinese miners will be looking at will be El Salvador. The President has made arrangements for volcano-based mining which is 100% clean energy that will be available to miners who may want to set up shop in the country.
Bitcoin is trading at $33,100, down 6.66% for the day, as of the time of writing this report.