The drop in Bitcoin’s mining power occurred after the authorities banned BTC miners in China’s province of Qinghai. The last drop in the hash rate that took place in April this year was 37%.
Since April, the hash rate of the Bitcoin (BTC) network has shown instability, falling considerably until saturating the mempool. There was recently a drop of about 40% in the hash rate, the worst since May 2017, when it plummeted by 55%.
In recent days, the computing power of the network went from 178 EH/s to 107 EH/s, according to data from Coinwarz. This drop is slightly larger than the one that occurred in April, when the hash rate fell by 37%.
Due to the drops in the Bitcoin hash rate, more time may be necessary to mine the blocks within the network. This situation causes a bottleneck in incoming transactions, which implies an increase in mining fees.
Activity on the Bitcoin network had recently decreased, emptying mempools, and reducing fees to an average of up to 1 sat/vbyte. After the hash rate fell, fees have returned to an average of 18 sats/vbyte.
The network could begin to suffer agglomerations of pending transactions due to the low computing power, compared to the difficulty of mining. This situation could lead mining fees to increase even more and users will have to wait for the next adjustment in difficulty. On the contrary, if the hash rate of the network increases again, the cost of the fees will be lower.
The recent drop in the hash rate occurred three days before the end of the next period of adjustment in difficulty. Meanwhile, the difficulty adjustment takes an average of the entire period of 2,016 previous blocks. This could mean that the decrease in mining difficulty will be slight in the next period.
The Ban on Cryptocurrency Mining Leads to the Drop in Hash Rate
The recent bans on Bitcoin mining in China’s provinces of Qinghai and Xinjiang seem to have caused the hash rate to drop. This happens after the measures that the Chinese government imposed to combat and punish the extraction of cryptocurrencies within the territory.
According to the authorities of the Asian country, the measures against cryptocurrency mining are intended to reduce the emission of carbon dioxide (CO2). They seek to avoid the indiscriminate consumption of energy from burning fossil fuels like coal, oil, and gas.
Some mining pools, such as Antpool, saw their hash rate drop by around 25%. That happened after the announcement of the closure of operations of cryptocurrency miners in China.
According to data from the mining map by the University of Cambridge Bitcoin, China accounted for 65% of global mining in April. During the last drop in the hash rate in April, the price of the pioneering cryptocurrency fell close to 14%. At the time of writing this article, Bitcoin is trading at around USD 37,500 and went up by 2.3% in the last 24 hours.
By Alexander Salazar
