The ban on mining in Chinese key provinces is the main reason for the fall of the Bitcoin hash rate. The government of the Asian country has banned mining since the use of fossil fuel goes against its interests.
The hash rate of Bitcoin continues to fall considerably, going from being one of its most stable indexes to being the most volatile. Massive mining equipment disconnections in China have led to this decline in the processing power of the cryptocurrency.
The drop in the hash rate reduces the speed of transactions, increases vulnerability to attacks, and causes the price to fall.
However, mining difficulty would drop to levels below 20% in a few hours. In other words, active miners will receive better rewards as they can quickly solve block processing math problems.
Relationship between the Fall of the Bitcoin Hash Rate and the Measures of China
The measures of China against mining are the main reason for the fall of the Bitcoin hash rate. It is important to remember that the authorities of that country banned cryptocurrency mining in several key provinces.
Regions such as Xinjiang, Inner Mongolia, Sichuan and Yunnan concentrated around 60% of the world’s farms. For that reason, the disconnection of the machines operating there is causing the Bitcoin hash rate to plummet.
The current decline in processing power is not a natural process like those that occur during seasonal changes. On the contrary, this decrease in the hash rate is problematic as reconnections remain pending.
The Communist Party’s Crusade against Cryptocurrency Mining
Bitcoin mining has received attacks from several directions in recent months. The alleged damage to the environment provokes criticism from influential figures such as the CEO of Tesla, Elon Musk.
Regarding China, its economy does not work in the same way as in the rest of the world. The Communist Party is in charge of holding the reins of the nation. For that reason, the economy works according to the communist view of development.
It is a strictly planned economy as the nation has clear long-term goals. For example, it seeks to become a CO2-neutral country by 2060.
Xinjiang was one of the regions that concentrated the highest percentage of Bitcoin hash rates. Fossil fuels such as coal and natural gas are the predominant energy source, which goes against the interests of Beijing.
Consequences of the fall of the Hash Rate of the Bitcoin Network
Nobody can accurately predict the effects of the dramatic fall in the Bitcoin hash rate. The processing power of the pioneering cryptocurrency currently stands at 92.79 EH/s.
This figure shows a recovery when comparing it to its rate after it fell to 58 EH/s. However, it is possible to see a drop above 50% when comparing it to the levels of May.
The blockchain network would be more vulnerable to possible attacks, but it would be a very low possibility. The fall of the Bitcoin hash rate would also affect the market price of the cryptocurrency.
Bitcoin is a very volatile asset, and its price fluctuation reacts quickly to positive or negative news. Although the drop in its hash rate can be positive, it is usually the opposite. For that reason, it can cause the price of Bitcoin to drop and disconnected miners to liquidate some Bitcoin to move abroad.
By Alexander Salazar
