Following the enforcement of cryptocurrency trading in China, it may soon be much easier and more lucrative to mine Bitcoin.
Amid fears of the environmental impact of mining, Beijing last month called for restrictions on bitcoin miners. The move caused many of them to slip from China to other regions, such as North America. The fight against crypto in China intensified further over the past weekend when authorities in Sichuan Province, which is rich in renewable energy, ordered miners to cease operations.
Between 65% and 75% of all global bitcoin mining takes place in China. According to reports, more than 90% of the mining capacity there has been shut down. This may not be good news for Chinese bitcoin miners, but others may benefit.
In addition to making transactions, the Bitcoin mining process also produces new Bitcoin coins, which rewards the miners, assuming they are successful. Currently, the miners are limited to the reward of 6.25 Bitcoin coins. In the past it was 12.5 coins, but since the bitcoin supply is limited to 21 million, the amount of bitcoin granted to miners shrinks in half about every four years.
It’s going to be easier
The overall hash rate of the Bitcoin network seems to have fallen sharply due to Chinese enforcement – last month the processing power dropped from a peak of 180.7 million terahs per second (index of crypto mining speed) in mid-May, to about 116.2 million terahs last Wednesday , According to Blockchain.com data.
Crypto experts say that the more miners shut down due to restrictions in China, the greater the share of other miners in the network – which may make mining much more cost-effective.
“As more processing power goes down from the network, those who stay active will get more for their relative share in mining rewards,” Kevin Zhang, vice president of mining company Foundry, told CNBC.
Meanwhile, the currency’s difficulty mining index moved from a high of over 25 trillion in May to 19.9 trillion last week. The figure is updated about once every two weeks, so there is a lag in information.
“The difficulty of mining decreases as there are fewer miners online,” Alice Killen explained. Killen is the founder and managing partner of Bitcoin-focused investment firm StillMark. She says shutting down miners in China is reducing competition for other bitcoin miners.
However, another factor determining profits for miners is the price of bitcoin, which has plummeted in recent months following comments from Tesla CEO Alon Musk and Chinese policy.
– Elon Musk (@elonmusk) June 4, 2021
The value of Bitcoin has almost crossed since reaching a peak of nearly $ 65,000 in April. The cryptocurrency fell below $ 30,000 last Tuesday, erasing the profits of 2021. Since then the currency has recovered slightly and is now trading at more than $ 33,000.