Bitcoin Mining Power Loses Steam Amid New Onslaught From China

It’s not just the price of bitcoin that has been down in recent days. Also the cumulative processing power of Bitcoin miners (the hash rate) has dropped by around 20% in just over a week.

Between May 13 and the present, the Bitcoin hash rate went from more than 180 EH / s to 145 EH / s , according to the 7-day average calculated by blockchain.com.

The computational power measurement in Bitcoin is an approximation, so the numbers vary by source. However, they coincide in the fall of the last days, with slight variations. BitInfoCharts , for example, shows the peak of just over a week ago around 171 EH / s. And although it reflected a level below 120 EH / s last Saturday, May 22, for today it shows an accumulated power of more than 150EH / s.

The loss of processing power can be due to several causes. But the common factor seems to be China, which makes sense considering that much of the main Bitcoin mining pools come from the Asian country.

An intense rainy season in the Asian giant could be causing the fall of part of the accumulated processing power, as Alejandro de la Torre, an executive of one of the main Bitcoin mining groups, had advanced a few days ago.

Consulted by CriptoNoticias, the Poolin executive had referred to the migration of mining equipment from one region to another within China. While this process is taking place, the computers are disconnected from the network.

Also recently, China strengthened its position against Bitcoin. First, with a new ban on the use of cryptocurrencies for institutions and means of payment. Then Reuters outlined the Chinese government’s intention to crack down on those who mine Bitcoin on its territory with “strong measures.”

The persecution of miners in the Asian country began to take effect, with measures such as the one taken by the Inner Mongolia region a few days ago. As this newspaper reported last Friday, the local authorities began a campaign asking their citizens to report those who engage in digital mining.

Likewise, local media report the suspension of all its services associated with Bitcoin mining by the Huobi exchange, in response to the measures announced by the Chinese government.

Possible network congestion
The Bitcoin hash rate slump comes just after an adjustment that took the difficulty to its all-time highs . However, the situation has not generated, at the moment, a great congestion or a significant increase in the commissions for the processing of transactions in the network.

Currently, there are about 25,000 transactions to be confirmed in the Bitcoin mempool with less than 100 satoshis per vbyte of commission to enter the next mined block. The state of the network despite the loss of power could be made up for having recently passed the weekend.

Normally, the movement of transactions falls on Saturdays and Sundays, generating a decongestion of the network. According to data from Mempool.space , a 16% drop in the difficulty of mining is expected , due to the loss of power accumulated by the miners. If this adjustment finally occurs, it would become the most pronounced downturn of the year, exceeding the 13% recorded in early May .

But the next adjustment is still around five days away. And if the hash rate is not recovered, we could see the network congest during this week. Another element to take into account is that, if the volatility in the market continues, there could also be more movement of transactions towards exchanges, which could contribute to greater congestion.