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Despite bans, China ‘resurgence’ in BTC mining market

3 min read

In mid-2021, China intensified its actions aimed at fighting the cryptocurrency market in the country and also mining.

Thus, after the bans, miners that operated in the country had to migrate to other countries. With that, China has lost its position as one of the top BTC mining centers in the world. But that has changed over the months.

The latest figures from the Cambridge BTC Electricity Consumption Index (CBECI) regarding global hashrate (mining computing power) show that China has once again become the second largest BTC mining hub in the world.

BTC Mining Survives in China

Last year, following the migration of miners from China to other countries, a study by the University of Cambridge revealed that the United States had become the leader in the global hashrate of the BTC network. Then came Kazakhstan and Russia.

As of May 2021, a year ago, China accounted for about 50% of the global total. But that percentage dropped to 0% in August after China banned the activity. However, in September 2021, the Chinese hashrate percentage jumped to 22.3%.

And in the following months, China managed to maintain an average above 18%, despite the intense crackdown on mining.

“Following the government ban in June 2021, the reported hashrate for the entire country dropped to zero during the months of July and August. However, the reported hashrate suddenly rose to 30.47 EH/s in September 2021. This instantly catapulted China to second place globally in terms of installed mining capacity (22.29%),” the group’s report reads. .

Now, the Asian country was only behind the US, with 38%. Kazakhstan was third.

Mining resurgence in China

In a publication on Tuesday (17), the Cambridge-based group highlighted that the new data confirms that the US has not only maintained its leading position, but also outperformed the rest of the world in terms of hashrate growth.

“This is evidenced by the increase in installed capacity from 42.74 EH/s (35.40%) in August 2021 to 70.97 EH/s (37.84%) in January 2022”, says the CBECI.

In any case, what really stands out is the “resurgence” of China in this market. According to the report, this strongly suggests that significant underground mining activity has formed in the country.

“Access to off-grid electricity and geographically dispersed small-scale operations are among the main means used by underground miners to hide their operations from authorities and circumvent the ban,” the report reads.

Analysts further say that as the ban took hold and time passed, “underground miners” gained confidence and “seem satisfied with the protection offered by local proxy services”.

Limitations of the methodology

However, the group’s methodology has some limitations. After all, as they said themselves, a return of this magnitude is unlikely in just one month.

This is particularly unlikely when considering the physical issues of installing machines. Instead, the authors believe that a more likely explanation lies in the research methodology.

“[A metodology] is based on aggregated geolocation data reported by partner mining pools. This approach is theoretically vulnerable to deliberate obfuscation by individual miners who may, for various reasons, choose to hide their location using virtual private networks (VPN) or other proxy services.

Despite this, the report notes that this limitation had only a “moderate impact on the validity of the overall analysis”.

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All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

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