The recent crackdown on Bitcoin miners’ activities in China forced the Bitcoin hash rate into a nosedive over the last few days – from 36 million per second (mps) in July 2018 to 180 mps in May 2021 and now to 90 mps. It has also drawn further attention to the environmental issues associated with mining the top cryptocurrency.
Aside from these, several other issues have also been identified by some observers.
Chinese miners relocation cost
Following that there were about two million servers in China that need to be decommissioned as a result of the call for a complete shutdown of the industry, it would cost Chinese miners an estimated over $1.11 bln to complete the shutdown, according to Bob Burnett, the CEO of Barefoot Mining and former CTO of Gateway Inc.
It means a possible liquidation of approximately 32,750 BTC (at the rate of $34,000), Burnett adds in a post, though he didn’t indicate an estimate for the extra cost to put these units back into operation elsewhere. He notes that over 54, 398 GWh of energy would be needed annually by miners outside of China – similar to the energy used in countries like Greece, Romania and Switzerland – to be back on their feet.
Meanwhile, while he believes Chinese miners will suffer greatly, he states that the move is positive for the security and further decentralization as the Bitcoin network will have a more global and distributed footprint.
Over-regulation may come
Since the crackdown took effect, some mining pools have reportedly migrated their operations to other parts of the world particularly Kazakhstan and Texas in the U.S. Simon Yu, co-founder and CEO of crypto cashback start-up StormX, agrees that China’s moves will lead to more decentralization for Bitcoin but added that “over-regulation” of crypto in the U.S. could be a problem.
“As a country, the U.S. has too many departments regulating it from different angles — is crypto a security? A commodity? A property?” Yu told CNBC. “As of now, the U.S. hasn’t figured out how to properly regulate the industry, which oftentimes leads to decisions that are difficult for crypto to operate.”
Pete Howson, a senior lecturer in international development at Northumbria University in the UK, sees China’s move as starting a “global arms race in Bitcoin mining equipment” that can lead to a “coordinated crackdown worldwide.” Howsen’s also suggests that like in the aftermath of the 2017 bear market, mining equipment sold off cheaply by Chinese miners who don’t relocate in the wake of the crackdown could end up being used for nefarious means. It has been reported that miners in China are already selling off a lot of Nvidia and AMD GPUs for less which could be indicative of a larger slide in cryptocurrency profitability or viability.
A win for digital yuan
In another vein, and in the wake of a pilot programme launched by the Beijing subway to try out passengers using the digital yuan to access the transport service across the city, the supposed purging of China of Bitcoin mining activities could positively impact the rise of the central bank-backed digital currency. Bitcoin may no longer be considered a direct and a viable challenger to the government-controlled digital currency which is set to see large-scale exposure and use in coming days.