Crackdown on Mining in China Leads to Bitcoin Hashrate Plunge
Recent actions by China have led to a significant decline in Bitcoin's hashrate, causing concern among analysts about the future of the cryptocurrency.
Bitcoin miners in China’s Xinjiang province have begun shutting down operations following a recent crackdown from Beijing. This has led to the offline status of approximately 400,000 mining machines, resulting in a considerable decrease in the network’s hashrate.
“One major reason is China’s mining crackdown coming back into focus,” said analyst Bull Theory on Wednesday.
Translation: “One major reason is China’s mining crackdown becoming a focus again.”
As a result, the network’s hashrate has declined nearly 8%, which is significant considering that China accounts for about 14% of the global hash power.
Asian Whales Liquidating BTC
The analyst also noted that long-term holders in Asia likely started offloading their BTC holdings several weeks ago in anticipation of stricter regulations, as reflected in on-chain data showing an uptick in selling. Additionally, miners forced to close operations are liquidating their BTC reserves and equipment to offset losses.
It’s observed that exchanges like Binance and Bybit report consistent net selling, while U.S. exchanges, including Coinbase, continue to see net buying.
“This is not panic selling. This is supply changing hands. And price usually stays weak until that pressure is gone.”
Translation: “This is not panic selling but a transfer of supply. Prices usually remain weak until that pressure dissipates.”
Bitcoin’s hashrate has noticeably reduced by 10% from roughly 1,160 EH/s in October to about 1,045 EH/s in December, marking three consecutive negative adjustments. Various factors contribute to this trend, including:
“Declining Bitcoin prices pushing legacy hardware into negative margins, regional enforcement actions removing capacity from major mining regions, and rising winter energy costs triggering seasonal curtailment across North America.”
Translation: “Falling Bitcoin prices are rendering old hardware unprofitable, localized enforcement actions are removing mining capacity, and rising energy costs due to winter are leading to production cutbacks.”
The combination of price pressure, seasonal energy costs, and regulatory actions is pushing marginal miners out of the market. Consequently, the hashprice, indicating earnings potential per hashrate, is at a record low, further putting stress on miners to liquidate assets.
Bitcoin’s Ongoing Decline
With this hashrate slump, Bitcoin’s value continues to decline. Despite fluctuations driven by manipulative trading practices, the cryptocurrency has struggled to regain the $87,000 mark and was trading at $86,560 during the time of this report.
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