Experts believe that the China mining crisis is not yet ended.

Despite Bitcoin's apparent increase in hash rate, researchers pointed out that the recent 150 EH/s reading was based on a small 24-hour span. The Chinese government took the historic step of banning all crypto mining operations within its borders earlier this year, resulting in a massive exodus of hashing power from China to neighboring countries, dropping from 168 exa hashes per second (EH/s) to nearly 86 EH/s as of June 23, a drop of nearly 40%.

To refresh your memory, the hash rate is the entire processing power required to obtain a single Bitcoin (BTC). In other words, whereas central banks issue fiat currency, miners are rewarded with new Bitcoin in exchange for solving blocks of complicated mathematical code.

China claimed 65 percent of the world's total Bitcoin hashing power prior to the ban. However, after the aforementioned relocation, a large number of mining pool operators have packed their belongings and moved on to brighter pastures. In one case, Bitfarms, a Canadian mining company, reported a roughly 30% rise in revenue quarter-over-quarter in Q2 2021, with the company mining 26% more BTC than the previous quarter.

What exactly is going on?

After a few months of turbulence, BTC's hash rate levels appear to have stabilized, with numbers appearing to be back to where they were a few months ago. In this regard, data from crypto analytics firm CryptoQuant shows that the metric has once again surpassed the 150 Exahashes threshold, reaching 152 EH/s, more than triple the levels attained on June 28 (52 EH/s).

It's also worth noting that on May 13, Bitcoin's average hash rate reached an all-time high of 197.6 EH/s, only to plummet by over 65 percent as mining rigs across China were hit by the "great migration." With the metric currently approaching early June levels, fresh all-time high readings are expected in the next months.

Kevin Zhang, vice president of business development at crypto mining firm Foundry, commented on the situation, saying that things are still far from “normal,” and that the 152 EH/s reading was based on a short 24-hour hash rate estimate window, where luck was high across the entire network and blocks were solved faster than expected, adding:

“At the moment, the hash rate's 24 hour moving average is hanging around 130EH/s, which is in line with its three- and seven-day moving averages. BTC's hash rate is slowly but steadily improving and returning to normal. However, the vast majority — if not all — of China's large-scale miners who have been displaced by the crackdowns have either transported their fleets abroad or are storing them until they can find open hosting capacity.”

He went on to say that, as things stand, the entire world is still reliant on easily available infrastructure to support all of the displaced mining machines and keep Bitcoin's hash difficulty at a reasonable level.

“It's fantastic to watch hash rate come up, and a lot of it is due to fresh orders being delivered for the first time. We could very well be establishing new all-time highs for network difficulty and hash rate before the end of the year,” Zhang said.

China's prohibition will have long-term consequences.

Philip Salter, the chief technical officer of Bitcoin mining company Genesis Digital Assets, is expecting for a better scenario in China or waiting for a good opportunity to relocate outside of the country.

However, he said that most large mining sites have been purchased by the end of 2021, and that there is simply no short-term capacity for adding 5-8 gigawatts of mining hardware, hinting that the situation hasn't yet achieved a concrete settlement. Salter continued, "

“So, the problem isn't yet resolved, and I believe the impacts of China's mining exodus will be seen for at least another year. Most mining hardware will most likely reappear at some point, and the hash rate will restore. But we'll have to wait and see if it happens gradually over time or if panic-driven hardware sales crash market prices.”

Similarly, he believes that most machines that went offline in China owing to the crackdown have yet to find a home abroad, as previously ordered machines continue to be delivered to their international customers.

On a more technical issue, Rugnets noted that Bitcoin's total hash rate lost around 60 exahashes of computational power in the weeks following the crackdown. Given that the majority of the mining machines were not of the most recent generation, he estimates that 750,000 machines would have been taken offline as a result of the crackdown.

Finally, Rugnets believes that Bitcoin's hash rate will continue to rise when manufacturers supply already purchased devices. Furthermore, he stated that each unit of these new mining computers has an eight-fold higher hash rate than prior generation machines that previously dominated the Chinese market. “Bitcoin's hash rate could potentially reach a new all-time high by the end of the year,” he predicted.

Mining corporations in North America are ramping up their efforts.

According to data supplied by the Cambridge Electricity Index, mining pools based in the United States began capturing huge percentages of BTC's hash rate even before June, when China's local prohibition had yet to take effect. Riot, a mining company based in the United States, reported $31.5 million in mining-related revenue for the three-month period, jumping over 1,500 percent from $1.9 million in Q2 2020.

In comparison to the previous quarter, the company claimed a 38 percent rise in the overall number of Bitcoins it was able to mine, with 675 BTC generated versus 491 BTC in Q1. In fact, Riot and Whinstone US just announced a $650 million 400 megawatt expansion project, with four more power plants currently under development.

Marathon (268 percent), Bitfarms (210 percent), Riot (126 percent), and Hut8 are some of the other North American mining companies that have seen spectacular year-to-date increases (180 percent ). Furthermore, research indicates that the aforementioned organizations were able to earn 58 percent more Bitcoin in July than they did in June.

Marathon Digital Holdings CEO Fred Thiel commented on his company's recent performance, revealing that revenue increased by 220 percent (to approximately $30 million) in the second quarter of the year compared to the previous quarter. In addition, within the same time period, the company's hash rate climbed by a stunning 196 percent.

As a result, it will be interesting to monitor how Bitcoin's hash rate recovery progresses in the next months, especially as a growing number of companies around the world increase their production capacity.

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