From May to July we saw the Bitcoin hash rate fall off a cliff when China banned crypto mining in the country---it dropped nearly 40% over 3-4 weeks. The Bitcoin hash rate is the amount of computing power being contributed to the network through mining. Since China implemented the mining ban, we’ve seen mining capacity disperse around the globe, from Kazakhstan to Texas. The current view is that this move makes the network and hash rate more stable and trustworthy as the backbone of the network (miners) isn’t concentrated in an antagonistic country. The forced move has included relocating tens to hundreds of thousands of computers and graphics cards to different countries, as well as securing space, construction on buildings, negotiating electricity rates, etc. All of that overhead explains why the hash rate is still only about 66% of it’s May high.
After a few weeks of miners restarting their operations, the hash rate has been rapidly rising and is nearly at par with the level seen last year when most of the world’s mining was taking place in China, and it’s aggressively trending up towards a full recovery.
Bitcoin mining automatically adjusts difficulty based on the amount of mining occurring in the network roughly every two weeks. When China’s capacity, which accounted for 54% of the total hash rate, went offline, the difficulty plummeted. With the most recent adjustment the difficulty to mine Bitcoin (~7.3% more difficult this past week) is still down some 42% from its peak back in May.
Takeaways: Bitcoin mining is picking up again, though it’s still significantly below the all-time high in May, and the difficulty to mine is adjusting with it. After the hash rate, a measure of mining, dropped from China’s ban on crypto mining, the current mining level has nearly recovered to where it was last year.