Bitcoin miners back at record activity from before China crypto crackdown | Fortune

Mining Bitcoin, the world’s largest cryptocurrency, has almost completely recovered to reach the record levels of activity hit before China cracked down on the crypto industry earlier this year.

The hashrate, or measure of computing power dedicated to mining and processing Bitcoins, is now back up to 175 million terahashes per second—a steady climb from July, when it bottomed out at 85 million terahashes per second after China banned the practice of mining the coin because of unsafe coal mining.

Prior to the crackdown in May, the global hashrate hit a record of around 180 million terahashes a second, with China bringing the largest source of hash power, mining around two-thirds of the world’s Bitcoin with about 86 terawatt-hours (TWh) of electricity.

“What this does indicate is that even when you disrupt the largest single center for activity, the Bitcoin community seems to have shrugged it off,” David Reiner, a professor of technology policy at Cambridge University’s Centre for Alternative Finance, told Fortune, noting the recovered hashrate displays the miners’ “remarkable resilience.”

The crackdown in China was spurred by Bitcoin miners’ use of energy from illicit coal extraction, which supplied around 63% of the energy used in crypto mining in the country, according to Rystad Energy. At the time, the Chinese government said Bitcoin mining, which demands a lot of energy, endangered lives and undermined President Xi Jinping’s environmental goals.

During the crackdown, 26 major Bitcoin mining hubs were forced to shutter in Sichuan, and during one week in June more than 70% of the total mining capacity in China went offline, industry analysts estimate.

Following the ban, the U.S., Kazakhstan, and Russia took China’s place. The U.S.’s global hashrate share reached around 35.4%, up from 16.8% before the China crackdown. Meanwhile, China’s neighbor Kazakhstan—whose proximity and cheap coal offering made it an attractive destination—gained 10 percentage points in share of the global hashrate, to reach 18.1%, and the Russian Federation, coming in third place, took 11% of the global share, according to the Cambridge Centre for Alternative Finance.

But miners may be forced to look for a new home again, as a squeeze in Kazakhstan’s power supply has pushed the government there to place limits on the energy-intensive mining industry. “There’s zero potential for Bitcoin mining at the moment in Kazakhstan,” Almas Chukin, a partner at private equity firm Visor Kazakhstan, in the Kazakh city of Almaty, told Bloomberg News.

Electricity shortages have already pushed some crypto miners to relocate. Mining firm Xive announced in late November it would be moving its crypto mining farm out of southern Kazakhstan. “Sad to shut down our mining farm in south [Kazakhstan],” Xive cofounder Didar Bekbau wrote in a tweet, tying the decision to the “country risk” of operating a crypto mining farm in the southern part of the central Asian nation.

Little sad to shut down our mining farm in south KZ. Last container is ready to be sent. So much work, people, hopes are ruined. Country risk played out pic.twitter.com/J8ZMg6GeUI

— Didar (@didar_bekbau) November 24, 2021

Some argue Bitcoin mining can be an environmental positive by balancing the grid—that is, by moving to places where miners can use excess energy at times when it is not needed.

But other analysts are not so optimistic. Reiner of the Cambridge Centre for Alternative Finance calls the shifting movements of Bitcoin miners a “rearranging deck chairs on the Titanic” way of thinking, as there is no way to use vast amounts of energy sustainably, even if it does come from an abundant supply of renewable energy—which at this point does not yet exist.