Bitcoin mining has fully recovered since the Chinese crypto crackdown earlier this year, which effectively shut down more than half of the world’s miners overnight.
Although Bitcoin mining recovered, the price of the bitcoin still remains below $50,000 region. At the time of writing this article, bitcoin was trading at $48,566.70.
Hashrate, a statistic used to quantify the computational power of all miners in the bitcoin network, is used to determine the recovery. The data from Blockchain.com paints a clear picture of the recovery and the prior plunge.
Data from the image above shows that the network’s hashrate is up about 115% in five months.
China had long been the core of the crypto mining business, with estimates showing that it accounted for 65% to 75% of global bitcoin mining.
However, more than 50% of bitcoin’s hashrate disappeared from the global network after Beijing essentially banned the country’s cryptocurrency miners in May.
What caused the crackdown
According to Rystad Electricity, the crackdown in China was sparked by Bitcoin miners’ usage of energy from illegal coal extraction, which provided about 63% of the energy utilized in crypto mining in the country.
The Chinese authorities claimed at the time that Bitcoin mining, which uses a lot of electricity, was endangering people’s lives and undermining President Xi Jinping’s environmental ambitions.
During the crackdown, 26 major Bitcoin mining hubs were forced to shutter in Sichuan, and during one week in June more than 70% of the total mining capacity in China went offline, industry analysts estimate.
Why the quick recovery
Tony Zhang, Chief Strategist, OptionsPlay explain to CNBC the reason behind the bitcoin network’s speedy recovery
He said the recovery was because the U.S. laid the groundwork to become a new mecca for mining. Zhang says that in the United States, there is a “huge appetite for growth, building infrastructure, and leveraging stranded power.”
He explained that for years, companies in the United States have been quietly increasing their hosting capacity, betting that if appropriate infrastructure was in place, miners would come to the United States when the time was perfect.
There wasn’t much demand for large bitcoin farms when bitcoin plummeted in late 2017 and the larger market entered a multi-year crypto winter. The opportunity to deploy cheap money to build up the mining ecosystem in the United States was spotted by US mining companies, which leapt at the chance.