Bitcoin’s hashrate has dropped a lot in recent days due to the Chinese ban.
In fact, the forced closure of several mining farms in China has caused the hashrate to fall by 43% from its mid-May peak.
It should be noted, however, that in mid-May the total computing power used to mine bitcoin had reached an all-time high of over 170 Ehash/s.
Excluding the sudden drop in mid-April, due to China’s announcement that it would ban bitcoin mining, the hashrate had been growing since late December 2020. In fact, it rose from around 130 Ehash/s at the end of last year to 170 Ehash/s in mid-May, an increase of 30% in four and a half months.
By mid-April, it had momentarily dropped to 98 Ehash/s, but was back to normal within four days.
The collapse of Bitcoin’s hashrate
In contrast, the current slump, largely due to the recent forced closure of mining farms in China, appears to be more long-lasting.
It began the day after the all-time high in mid-May, probably due to the falling price of bitcoin. In fact, within about ten days it dropped from 170 to below 120 Ehash/s, before settling back in the following days in a range between 120 and 140 Ehash/s.
On 10 June, however, it suddenly dropped from 140 to 99 Ehash/s, a fall of almost 30% in a single day. This drop is due to the closure of Chinese mining farms.
Until now, much of the computing power for Bitcoin mining was located in China, but it seems that the Asian country has decided to prohibit this activity, or at least to discourage it, so that several Chinese miners have shut down their machines and are now moving them abroad.
This dynamic has so far prevented the hashrate from returning to previous levels, so much so that it even fell below 90 Ehash/s yesterday.
This was a level not seen since the beginning of November last year, after there was a small crash at the end of October that suddenly brought the hashrate down from 130 to 85 Ehash/s in three days. At that time, it only took a couple of weeks for everything to return to normal.
Now, however, the scenario looks different. The collapse took place almost a fortnight ago, and so far there are no clear signs of a return to well over 100 Ehash/s.
In fact, the block time has spiked to over 13 minutes, with a peak of 15 minutes yesterday, as the hashrate dropped below 90 Ehash/s.
However, the fees have not increased much, partly because there are not many transactions queued up on the mempool at the moment waiting to be confirmed by the miners.
Furthermore, mining profitability has not moved much since it collapsed in mid-May due to the bitcoin price crash, making it clear that the Bitcoin mining system is not in any danger.
The next difficulty adjustment, which should bring the block-time back to the usual 10 minutes, is expected at the end of the month, or early July, and could be one of the largest single reductions ever, by percentage.
In other words, Bitcoin doesn’t need the Chinese miners, whose exit may at most slow down the speed at which transactions are confirmed for a few days.