After the migration from China, bitcoin miners are looking for a new home

  • As Chinese miners seek greener pastures, countries compete for the bitcoin mining business. This is where they’re going to end up. The news of a big migration of miners from China shook the crypto market a few months ago
  • As a result, Bitcoin’s hash rate plummeted to its lowest point in history. As many Bitcoin network participants shut off their equipment, China’s share of BTC mining has plummeted by 55 percent since the beginning of the year
  • Before trying to figure out where the miners are going, it’s important to understand why the Chinese government prohibited mining in the first place, as well as the ramifications that decision will have on the cryptocurrency business and even some areas of the Chinese economy

As Chinese miners seek greener pastures, countries compete for the bitcoin mining business. This is where they’re going to end up. The news of a big migration of miners from China shook the crypto market a few months ago. The announcement that the Chinese government would stop Bitcoin (BTC) mining at the end of May 2021 exacerbated the already-existing regulatory pressure on miners. Purchasing cryptocurrency, as well as any linked investing activity, crypto trading, and exchange, are all prohibited practices. After extensive consultations with banks and payment systems, the People’s Bank of China ordered the main Chinese financial institutions to cease speculative trading, particularly with BTC.

As a result, Bitcoin’s hash rate plummeted to its lowest point in history. As many Bitcoin network participants shut off their equipment, China’s share of BTC mining has plummeted by 55 percent since the beginning of the year. This was proven by the fact that China’s secondary market was brimming with GPU cards. Miners were aggressively selling GPUs at below-market pricing, including the all-powerful GeForce RTX 3090 and Radeon RX 6900 XT. Of fact, not all miners, particularly those in huge pools, surrendered. Mining migration to other countries was the logical way out of the dilemma. But where did the Chinese miners go, and which countries have the potential to become the new mining meccas?

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Before trying to figure out where the miners are going, it’s important to understand why the Chinese government prohibited mining in the first place, as well as the ramifications that decision will have on the cryptocurrency business and even some areas of the Chinese economy. The major mining pools were the first to react when the restriction was implemented. Huobi, BTC.TOP, and HashCow have all or part of their operations halted. Huobi, one of the country’s top crypto exchanges, has suspended both crypto mining and some trading services for new mainland Chinese clients. BTC.TOP, a cryptocurrency mining company, has announced that it is ceasing operations in China due to dangers, while HashCow has stated that it will no longer purchase additional BTC mining stations.

Bitmain, the world’s largest producer of Bitcoin mining equipment, temporarily halted sales at the end of June 2021. After prices plunged by 75%, the corporation made this move. Only BTC miners were affected by the suspension; Bitmain continues to offer equipment for altcoin mining. The difficulty with mining, according to the Chinese government, was the enormous usage of electricity. China, which hosted the majority of the BTC mining pools, is heavily reliant on coal power, which emits a great deal of pollution. According to some crypto industry observers, the Chinese government’s true motivation was not to protect the country’s environment, but to promote its own cryptocurrency, the digital yuan — that is, by prohibiting BTC mining, the Chinese government clears the way for its own central bank digital currency (CBDC).

The digital yuan’s development is now in full swing. Subway users in Beijing were allowed to purchase tickets using the digital yuan as of the end of June 2021. The Agricultural Bank of China was the first in the country to allow its customers to convert digital yuan into cash and vice versa just two weeks ago. Simultaneously, the government appears to be deliberately discouraging CBDC competitors. The IPO of Ant Financial, Alibaba’s fintech division, was stymied in 2020, partly due to Chinese officials’ concerns that the Alipay payment system would compete with the digital yuan. Is it feasible, then, that miners were simply collateral damage on the route to the country’s goal of widespread use of the digital national currency? After all, the most recent crypto prohibition did not impose any new limits, as existing ones had previously been stated in 2017. 

Long before the prohibitive restrictions were enacted in May, China, which used to mine three-quarters of all BTC, began to cut its share of global mining. According to a study conducted by the Cambridge Centre for Alternative Finance on global Bitcoin mining from September 2019 to April 2021, China’s appeal to crypto fans was dwindling. This can be interpreted as a confirmation of the state government’s strong stance. Despite this, the country’s proportion of Bitcoin mining remained high, at around 46 percent. However, Huobi Pool’s CEO, Fei Cao, mentioned that increased compliance and capital requirements are the important themes for digital mining this year, and these two trends appear to be more promising in the North American region, where mining is permitted under local regulations.

Cao’s statements are backed up by statistics, which show that the United States has more than doubled its share of global Bitcoin mining, from 4.1 percent to 16.8 percent. Long before the Chinese ban, and even during a period when the crypto market was in freefall, the United States has been steadily increasing its hosting capacity. When huge BTC farms were not in high demand like as in 2017, American mining companies were extremely active. Furthermore, the United States possesses some of the world’s cheapest energy sources, many of which are renewable. Furthermore, American investors are eager in working with miners. US oil and gas executives recently advised that miners use excess natural gas to create energy at a meeting in Texas.

Electricity at a low cost is particularly appealing to huge mining equipment manufacturers. Bitmain, for example, signed a partnership deal with Digital Currency Group’s subsidiary, Foundry, in 2020, which offers finance to Bitmain clients in North America and distributes a significant batch of BTC mining machines. Kazakhstan’s portion of Bitcoin mining has also increased significantly this year, rising from 1.4 percent to 8.6 percent. Because this country borders China, delivering equipment here is less expensive than shipping it over the ocean to North America. Kazakhstan’s authorities are also making the country more appealing to miners by permitting local banks to open cryptocurrency transaction accounts. Furthermore, following the legalization of digital currency in 2020, a mining firm can be lawfully registered in the country.

This has already been exploited by Chinese businesses. Canaan, a large cryptocurrency miner, stated in June that it had begun mining BTC in Kazakhstan. BIT Mining, which recently revealed its intention to expand beyond the Chinese market, aims to purchase 2,500 BTC miners for use in Kazakhstan. Experts estimate that Chinese miners delivered approximately 4,000 mining gear to Kazakhstan. Another key aspect in Kazakhstan’s desirability as a mining destination is its relatively low electricity prices, with 1 kilowatt costing $0.03. The country’s energy system, however, is not as large as that of the United States. Russia’s share of global mining has also climbed to 6.5 percent. Russia, like Kazakhstan, shares a border with China, which makes moving mining equipment easier. In July 2021, the Russian Association of Crypto Industry and Blockchain (RACIB) underlined the benefits of mining in Russia, emphasizing a surplus of inexpensive electricity.

Source: https://www.thecoinrepublic.com/2021/09/12/after-the-migration-from-china-bitcoin-miners-are-looking-for-a-new-home/