How China’s Mining Crackdown Is Lowering Bitcoin’s Hashrate to a Three-Month Low

China’s intensified enforcement of Bitcoin mining bans, particularly in Sichuan province, has driven the Bitcoin network’s hashrate down by approximately 10% over the past month, reaching a three-month low as of early June 2024. This development, combined with seasonal factors and shifting global mining dynamics, is reshaping the distribution of mining power and raising questions about network security, miner profitability, and the broader crypto ecosystem.

What happened

In early June 2024, reports confirmed that China’s renewed crackdown on Bitcoin mining activities has materially impacted the Bitcoin network’s hashrate. The decline, estimated at around 10% over the previous month, is largely attributed to intensified shutdowns of mining operations in Sichuan province. Sichuan has historically been a major mining hub due to its abundant and low-cost hydropower resources. However, enforcement of mining bans has been stepped up, coinciding with the region’s wet season, which typically incentivizes increased mining activity because of cheaper electricity availability.

This enforcement surge is reported by CryptoPotato and Reuters, with the latter emphasizing the seasonal compounding effect that has exacerbated the hashrate decline. The aggregate result is a significant reduction in computing power securing the Bitcoin network, pushing the hashrate to its lowest level in three months.

Concurrently, the global distribution of Bitcoin mining power is shifting away from China. According to the Cambridge Centre for Alternative Finance’s Bitcoin Mining Map, mining capacity is increasingly relocating to jurisdictions such as North America, Kazakhstan, and Russia. This migration is driven by miners seeking more favorable regulatory and energy environments following China’s crackdown.

In response to the reduced hashrate, Bitcoin’s network difficulty has adjusted downward as part of its automatic recalibration mechanism designed to maintain consistent block times. This adjustment was confirmed by Blockchain.com data. Arcane Research further notes that miner profitability is under pressure due to this hashrate drop and difficulty adjustment, compounded by Bitcoin’s price volatility and higher electricity costs in alternative mining locations.

Why this matters

The hashrate decline and geographic redistribution of mining power have several structural and market implications for the Bitcoin network. First, the reduction in China-based mining, particularly from Sichuan, diminishes concentration risk, potentially enhancing the network’s geographic decentralization and resilience. The shift toward North America and other regions diversifies the mining ecosystem, which some analysts interpret as a positive development for network security over the medium term.

However, the immediate effect of a significant hashrate drop includes a temporary increase in network vulnerability until difficulty adjusts. A sudden decrease in computing power could, in theory, raise the risk of attacks such as a 51% attack, although the network’s self-correcting difficulty mechanism mitigates this risk over time.

Miner profitability is also affected. Operating outside China generally entails higher electricity costs and potentially more complex regulatory environments, which, combined with Bitcoin price fluctuations, put pressure on margins. This may accelerate consolidation within the mining industry, favoring more efficient operators and possibly leading to the exit of smaller or less competitive miners.

From a market perspective, these developments underscore the sensitivity of Bitcoin’s infrastructure to regulatory shifts and regional energy economics. The evolving landscape may influence miner behavior, network stability, and ultimately, the security assumptions underpinning Bitcoin’s decentralized consensus.

What remains unclear

Despite these confirmed trends, several important questions remain unanswered by current reporting. Notably, the extent to which Chinese miners displaced by the crackdown will successfully relocate their operations abroad versus permanently shutting down is not yet clear. There is limited real-time data on the pace and scale of miner migration or the operational challenges they face in new jurisdictions.

Additionally, the long-term impact of higher electricity costs and differing regulatory regimes in alternative mining hubs on miner profitability and network hashrate growth is uncertain. Detailed regional profitability data post-crackdown is lacking, making it difficult to assess sustainability.

The timeline and magnitude of any hashrate recovery following the end of the wet season and potential easing of crackdowns are also not specified in current sources. Furthermore, broader geopolitical and economic factors—such as energy price volatility and international tensions—that could influence mining distribution have not been addressed in detail.

Finally, there is no direct data from Chinese mining firms or official government disclosures clarifying the scale, enforcement specifics, or strategic intent behind the crackdown, which limits the ability to fully understand the regulatory environment and its future trajectory.

What to watch next

Monitoring changes in Bitcoin’s global hashrate, particularly shifts in regional shares, to track miner relocation progress.
Updates on regulatory enforcement in China, especially any official statements or policy clarifications regarding mining bans.
Data releases or research providing granular insights into miner profitability by region post-crackdown.
Bitcoin network difficulty adjustments and their correlation with hashrate fluctuations, signaling network stability.
Developments in energy markets and geopolitical events that could impact electricity costs and mining viability in key jurisdictions.

China’s renewed crackdown on Bitcoin mining, combined with seasonal and economic pressures, has triggered a notable decline in the network’s hashrate and accelerated the geographic redistribution of mining power. While this may enhance decentralization and long-term network security, significant uncertainties remain regarding miner migration success, profitability sustainability, and the broader geopolitical context. These factors will be critical to watch as the Bitcoin network and its global mining ecosystem adapt to evolving regulatory and economic conditions.

Source: https://cryptopotato.com/chinas-mining-crackdown-drives-bitcoin-hashrate-to-three-month-low/. This article is based on verified research material available at the time of writing. Where information is limited or unavailable, this is stated explicitly.