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While China’s government downright banned cryptocurrencies last year, the country now has re-emerged as the world’s second largest bitcoin (BTC-USD) miner, with the U.S. remaining top dog, according to a report from the Cambridge Centre for Alternative Finance (“CCAF”) released this week.
Specifically, the U.S.’s bitcoin (BTC-USD) mining hub accounted for 37.84% of global hashrate (a measure of computing power — the speed of mining), followed by China (21.11%), Kazakhstan (13.22%), Canada (6.48%) and Russia (4.66%), as per the report, which referenced data from September 2021 to January 2022.
Keep in mind the total hashrate is hovering near all-time highs, meaning more bitcoin (BTC-USD) miners are getting involved with validating transactions on the Proof-of-Work blockchain, which ultimately improves the network’s security.
What was behind China’s return to the top?
After Beijing banned bitcoin mining in June 2021, the total hashrate cratered and China quickly lost its dominant stance, as its share of global mining capacity tumbled to zero, the CCAF said. Since then, much of China’s resurgence as a major mining hub is likely attributed to miners quickly relocating operations abroad (a large chunk in the U.S.), as well as an “uptick in covert mining operations.” That “strongly suggests that significant underground mining activity has formed in the country, which empirically confirms what industry insiders have long been assuming,” the CCAF explained.
“However, the abruptness of the resurgence raises questions that can be traced back to methodological trade-offs,” the research report said. “A comeback of this magnitude within the period of one month would seem unlikely given physical constraints, as it takes time to find existing or build new non-traceable hosting facilities at that scale.”
Some argue that the process of mining bitcoin (BTC-USD), which requires high powered computers, uses too much energy to be considered safe for the environment. For example, China’s government in November 2021 pressured state-owned businesses to stop mining cryptos, citing concerns about the country’s energy supply. That’s why renewable BTC mining — the use of clean energy sources — has become a popular industry among the entire mining sector.
Some publicly traded companies that are at least somewhat focused on eco-friendly crypto production include: Soluna (SLNH), Greenidge Generation (GREE), Argo Blockchain (ARBK), Galaxy Digital (OTCPK:BRPHF), Sphere 3D (ANY), Bitfarms (BITF), Iris Energy (IREN) and Powerbridge Technologies (PBTS).
The U.S. dominates bitcoin on all fronts:
Even though regulators grapple with how to implement regulations in the decentralized space, the U.S. still keeps its position as the world’s leading bitcoin (BTC-USD) mining hub, in addition to exceeding peers in terms of hashrate growth, the report said. Looking at America’s bitcoin mining hashrate distribution at the state level, Georgia (30.76%), Texas (11.22%) and Kentucky (10.93%) make up more than half of the country’s hashrate thanks to “access to comparatively low-cost electricity, available hosting capacity, and the enactment of favorable legislation,” the CCAF said. New York (9.77%), California (7.9%), North Carolina (4.7%), and Washington (4.1%) all saw substantial mining activity as well, the CCAF added.
Nevertheless, cryptos as well as risk assets more broadly are getting shunned by speculators due to a series of macro headwinds, such as rising interest rates, surging inflation, tighter monetary policy and a shortage in liquidity. Over the past six months, bitcoin (BTC-USD) has nosedived around 50%, changing hands at ~$29.2K as of Friday afternoon. Bitcoin’s cyclical downturn accelerated after the recent collapse of algorithmic stablecoin TerraUST (UST-USD) and its sister token Luna (LUNA-USD). Take a look at SA contributor Lyn Alden Schwartzer’s analysis on “the crypto crash.”
In October 2021, SEC’s Gary Gensler said the U.S. won’t ban crypto.
