What the Chinese mining ban means for the future of crypto
A large portion of the global hashrate is on the move. In recent weeks, provincial governments in China issued bans or severe restrictions on cryptocurrency mining in Xinjiang, Sichuan, Qinghai, Yunnan, and Inner Mongolia.
This comes just weeks after officials banned or restricted coal-powered mining in each of these five regions. The environmental impact of bitcoin mining has come to the forefront of industry conversation in recent months and an industry-wide effort is underway to fine ways to mine cryptocurrency sustainably.
Here is a closer look at the impact of the ban and what it means for crypto mining on a global scale.
The impact of the ban
Putting a hold on mining efforts in these highly active regions of China is particularly important because China makes up such a large share of the global hashrate – or at least, it did.
Just before the ban, China accounted for 46% of the world’s total hashrate. While this number may already seem high, it was even higher in September of 2019, when Chinese mining made up 76% of the global total. These numbers indicate that miners had already begun leaving China long before the ban – and that they are now certainly going to continue doing so in massive numbers.
Bitcoin’s hashrate itself has also felt the impact of the ban, falling from 197 EH/s on May 13 to 68 EH/s on June 28.
The price of bitcoin also dipped in accordance with the ban, moving from almost $60,000 at the beginning of May to below $30,000 on July 20 (it has since rebounded to near $40,000 at the time of writing). This has affected the cost of mining rigs, with prices for the Bitmain Antminer S9 and S19 specifically falling in the wake of the ban.
To correct these downturns and return to a bull market like we saw in the early part of the year, Chinese miners are going to have to find new and profitable ways to get back online.
Miners migrating out of China
Once the ban was issued, miners in the affected regions were ordered to turn off their machines or face the penalties. Now, the majority of these miners are facing a series of tough questions around what to do with their equipment. Should they ship elsewhere? Should they sell? Should they partner with a hosting provider or go out on their own?
These questions and others are all in need of urgent answers for miners, as prolonged periods of downtime equate to prolonged periods of a loss of profit. For many, the answer has been to move their hardware elsewhere, resulting in a massive opportunity for the rest of the world as roughly a million devices are now in search of new homes. Like a game of musical chairs, everyone is now trying to find a new home for their gear before the music stops.
For a large share of these miners on the move, the preferred destination has been the U.S. – and there is good reason for that.
Mining in America
Sought after for its geographic, political, and jurisdictional stability, there is thought the stronger rule of law in the U.S. can create better legal protections than miners were experiencing overseas. The U.S. features a more stable regulatory policy surrounding digital assets and also operates as a free market economy, while communism and similar geopolitical structures in other parts of world can result in unpredictable government control and even equipment seizing.
And then there is the energy. The U.S. is home to cost-competitive and stable energy. It has some of the most inexpensive energy on the planet, much of which is renewable. In 2019, renewable energy consumption in the U.S. surpassed coal for the first time in 130 years.
The U.S. and North America not only represent an untapped landscape for the global crypto mining migration, but the region is also poised to help create a more beneficial and sustainable future for the industry. And Compute North is ready to play a leading role.
Get online and grow with Compute North
Compute North owns and operates TIER 0™ data centers in Nebraska, Texas, and South Dakota, all of which are grid-connected with an energy mix that includes wind, nuclear power, natural gas, hydro, and solar. We offer the most scalable, cost-competitive hosting solution in North America, specifically designed to power crypto, blockchain, and HPC applications.
In addition to providing high-powered computing via cost-efficient energy, our managed services offering facilitates daily monitoring, troubleshooting, hardware upgrades, firmware management, and more, as we go the extra mile so you can mine better for longer.
Benefits of our ASIC miner hosting services include:
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