The hash power of the most important of the digital currencies in market capitalization, Bitcoin, continues to decline considerably. What used to be one of the most stable indices within the pioneering digital currency has now become the most volatile. The cause of this drop in the Bitcoin hashrate is due to the massive disconnections of mining equipment in China.
It is important to bear in mind that there are several consequences that this significant decrease in computing power could bring. Among them, the speed of the network to make transactions, vulnerability to external attacks and a probable drop in the market price stands out.
On the other hand, for those miners who remain active, there is positive news. It is related to the difficulty of mining, which would drop in a few hours to previously unseen levels of more than 20%. This means that active miners will receive better rewards due to the ease of solving block processing math problems.
Is The Fall Of The Global Bitcoin Hash Related To Punitive Measures In China?
The fall of the global hash of Bitcoin, is in relation of cause and effect with the measures of China against mining. In that sense, it should be remembered that the authorities of that Asian nation banned digital mining in key provinces.
Thus, in regions such as Xinjiang, Inner Mongolia, Sichuan and Yunnan, 60% of the world’s farms were concentrated. Therefore, disconnecting the machines that operated in those areas is causing the computing power of Bitcoin to plummet. This is one of the sharpest drops in the 12-year history of the cryptocurrency created by Satoshi Nakamoto.
Bitcoin hashrate drops are frequent phenomena and are often a great relief for small miners. However, the current fall is not a “natural” process like those caused during the changes of seasons in China. On the contrary, this decrease of the hash is problematic because the reconnections are suspended.
It should be remembered that when the winter season in China arrived, miners from different provinces would migrate en masse to Sichuan. The reason is that this province has a large hydroelectric power generation capacity and the rainfall allowed the generation of surpluses. The authorities of the region, lowered prices, which attracted miners from all over the country. This internal migration process affected the global hash of Bitcoin due to connections and reconnections.
The Communist Party’s crusade against digital mining
In recent months, Bitcoin mining has become the target of attacks from different fronts. The alleged environmental pollution caused by this is the reason behind the attacks by influential figures such as the CEO of Tesla, Elon Musk.
But going back to China, it should be noted that the economy of that country does not work in the conventional way as in the rest of the world. The reins of the nation are managed by the Communist Party and, therefore, the economy works according to the communist vision of development. In this way, economic development is attached to the five-year plans of the State.
In other words, it can be said that it is a strictly planned economy. Within that framework, the nation has clear long-term goals. One of them is to become a carbon neutral country by 2060.
One of the regions where the highest global percentage of Bitcoin’s hash power was concentrated was Xinjiang. In it, the predominant sources of energy are powered by fossil fuel, either coal or natural gas. Meanwhile, it can be said that the mining business collided head-on with the long-term development interests planned by Beijing.
The shadow of the Digital Yuan
Another reason behind the radicalism of the Chinese authorities against mining is the possible early appearance of the Digital Yuan. It is a digital currency protected by the Central Bank of the country. It will work in a similar way to cryptocurrencies like Bitcoin. The big difference is that it will be centralized by the government.
In that sense, the Beijing authorities are not willing to tolerate competition for their economic plans. Bitcoin could be considered as a threat to the mass adoption of the aforementioned CBDC that is in the testing process.
Hence, the actions of the authorities are not only aimed at attacking Bitcoin mining. On the contrary, the crusade goes further and affects trade. It should be noted that the exchange with cryptocurrencies was prohibited for years. However, the authorities let him pass. Recently, they tightened the knot and called on the main banks to take action against accounts suspected of being used to exchange fiat for cryptocurrencies.
The mining pools, has suffered an unprecedented abandonment. At the same time, cryptocurrency exchanges have limited functionalities related to trading. Even large mining equipment manufacturers such as Bitmain announced the interruption of sales to avoid possible legal consequences.
Consequences of the hashrate drop
The global Bitcoin hash, unsurprisingly, is in a head-on down from the above events. The consequences that this decline could bring are varied and difficult to predict. At the time of writing, the hashrate for the most popular of the cryptocurrencies stands at 97.17 EH / s.
The hash figure shows a recovery compared to the rate of this Monday, when the index fell to 58 EH / s. However, if it is compared with the levels of May of this year, it can be seen with the naked eye, a fall of more than 50%.
This could leave the Blockchain network more vulnerable to possible external attacks. Although it is a very low possibility, statistically it is still there. Another of the possible scenarios affected by the fall of the global hash of Bitcoin is the market price of the cryptocurrency.
It should be noted that it is a very volatile asset and its price fluctuation reacts quickly to positive or negative news. The drop in the hashrate can be considered positive in some cases, but generally negative. Therefore, at any given moment, it can cause the price of Bitcoin to fall. On the other hand, disconnected miners could liquidate part of their bitcoins to cover operating expenses for moving abroad.
The latter could overload the market with oversupply, causing the price of the digital currency to drop. Another possible scenario that would lead to a fall in computing power is the slowdown in transactions and the rise in commissions.
Data to take into consideration
- Bitcoin’s global hash power is in one of the biggest drops in the history of that cryptocurrency.
- As of May 10, this index was at 193 EH / s. Currently, it does not exceed 100 EH / S.
- It should be noted that the hash has recovered significantly from the drop on Monday, when it stood at 58 EH / s.
- The consequences of this fall could expand to various areas of the queen cryptocurrency.
- Among these, the price, the vulnerability of the network, the difficulty of mining, the rise in commissions and the slowdown in transactions.
- So far, the market price of the digital currency has not been affected by the hash drop.