The migration of Bitcoin and other cryptocurrency miners to other provinces in China was expected at the end of the rainy season in the country. Experts attribute these actions to the recent drops in the network's hash rate..
El hash rate de Bitcoin, fell by approximately 10% after several miners on the network abandoned their mining operations in Sichuan, China, to migrate to other provinces in the country. According to local media, the migration of Bitcoin miners in the Asian province is related to the heavy rainy season that China recently experienced, which put the lives of millions of citizens at risk in different provinces and cities.
The data shown so far by Blockchain.com reveal that there is a drop of 13,5 exahashes per second (EH/s) in the computational power of the network, which recently went from one of its maximums of 146,4 EH/s to just 132,9 EH/s in just a few days.
Source: blockchain.com
However, other analysts predict a slightly steeper drop for Bitcoin's hash rate. In this regard, Thomas Heller posted on his mining blog Hashr8, an article He talks about the possible drop in network power, due to the unpredictability of mining in Sichuan during the rainy season, since this is an area prone to natural disasters, but which concentrates much of the mining that controls the country. Likewise, Heller points out that this drop in power may be a consequence of the end of the rainy season in the country, since curiously it coincides with the weather forecasts that indicate the culmination of this season.
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A negative adjustment to Bitcoin difficulty
The Bitcoin hash rate, also known as the computing power of Bitcoin, has a direct impact on the level of difficulty of the network, which ensures that blocks on the blockchain are mined approximately every 10 minutes. Thus, a reduction in the hash rate will also reduce this level of difficulty, something that analysts and experts predict for Bitcoin. According to Heller, the second largest negative difficulty adjustment of the year may be about to occur for the main cryptocurrency on the market.
For its part, data displayed by the browser blockchain Bitcoin.com, show that the difficulty of the Bitcoin network may suffer a drop of 5,50% within the next 5 days, to a value close to 18,90 T. Despite the possible drop, the difficulty level remains high, which demonstrates the strength and security of the network.
Sichuan, a province preferred by miners during the rainy season
As reported by this media, this year's rainy season in China is one of the most aggressive seen in recent years. With several million citizens affected in the regions of Enshi, Hubei, Wuhan and Sichuan, the nation took strict measures to ensure the safety and integrity of citizens, from evacuations of an entire region to shutdowns of operations of the country's main power plants.
Although there were major disruptions in Sichuan, one of the country's largest provinces and where much of China's Bitcoin mining power is concentrated, miners kept the Bitcoin hash rate near record levels. This region saw a significant influx of miners who flocked to this province in search of profiting from its advanced hydroelectric infrastructure. Sichuan is seen by miners as a place of opportunity to take advantage of economic energy in China during the rainy season. However, the economic benefits offered by this region are balanced by the uncertainty caused by this area prone to natural disasters. In this regard, Heller cites that:
“During August there were a number of outages caused by rain and flooding. Cheaper electricity (~0,23 RMB/kWh) during the hydro season is always offset by the uncertainty of uptime.”
Poolin, one of the largest mining companies based in the country, shared a video on its Twitter account in 2019 showing the risks of setting up a mining farm in Sichuan province during the rainy season.
A trend of years
coinshares, a mining data provider, published that in December 2019 Sichuan province accounted for 54% of global mining activity, while the University of Cambridge revealed that the concentrated hash power in Sichuan as of April this year, before the start of the rainy season, was only 18,5% of Bitcoin’s hash rate. This data shows that the higher concentration of miners in Sichuan province is due to them seeking to take advantage of low energy rates during the rainy season.
Thus, with the end of this season, miners begin to migrate to other regions; as Heller pointed out, stating that many of the miners operating in Sichuan would move abroad or to other provinces in China when the season ends.
On the other hand, data released by the University of Cambridge for April this year also revealed that Xinjiang and Inner Mongolia provinces accounted for 30,1% and 7,7% of the world’s hash power, respectively, so analysts estimate that these may be the preferred destinations for miners after leaving Sichuan. Heller shares this view, stating that “many miners will move to Xinjiang, Inner Mongolia or abroad.”
Future fluctuations in the network hash rate
Lastly, Jameson Loop, renowned cypherpunk and co-founder of CasaHODL, he pointed recently that Bitcoin’s hashrate has dropped significantly over the past 3 days, presumably due to Chinese miners relocating their equipment for the dry season. Loop notes that over the next few years, semi-annual hashrate fluctuations can be expected to decrease in volatility as China’s share of the hashrate continues to fall.
At press time, Bitcoin's hash rate is 132,9 EH/s, with a difficulty of 19,997,335,994,446 (19,99 T), equivalent to 19,9 trillion. The latter is expected to drop by at least 5%, reaching a value of 18,89 T.
Continue reading: Bitcoin continues the upward trend, according to several analysts
