Since China’s Mining Ban, Bitcoin Hashrate Has Recovered by 68% And Counting
Bitcoin is a perpetual motion machine. The Bitcoin hashrate is slowly climbing to pre-China-ban levels, and the service continued uninterrupted without a hiccup. Such is the power of well-placed incentives. Pantera Capital’s CEO Dan Morehead adds one more factor to the equation. “The bitcoin network has recovered 68% of the drop in hashrate that our difficulty model attributed to China’s ban—likely in places with cleaner energy.”
The recovery is happening exactly as forecast.The #bitcoin network has recovered 68% of the drop in hashrate that our difficulty model attributed to China's ban—likely in places with cleaner energy.The transition to renewables is underway.Sep Letter: https://t.co/xLyaLpPQQN pic.twitter.com/UsK9ML3BU8— Dan Morehead (@dan_pantera) September 9, 2021
In the company’s newsletter, Pantera fleshes out the argument:
“Although difficult to know with certainty, it seems very likely that much of the reboot in mining power is occurring in places with cleaner energy than those utilized by Chinese miners. The transition to renewables is well underway.”
Regarding The Bitcoin Hashrate, Are ESG Concerns Even Important?
Here at NewsBTC we’ve determined that China’s Bitcoin mining tended to go to provinces with abundant green energy. Bitcoin incentivizes that. The Bitcoin hashrate tends to go where the energy is cheap. We’ve also determined that the environment doesn’t seem to be the reason for China’s Bitcoin mining ban.
“The fact that the electricity for crypto mining in Sichuan came from clean hydropower meant that many thought the province would be a safe haven for Bitcoin miners. As pressure on local governments to cut carbon emissions mounts, projects were successfully shuttered in some other provincial-level regions — such as Xinjiang and Inner Mongolia — where the mining was chiefly fueled by coal.” The only thing we can know for sure about the Chinese government’s plan is this: the environment is not on their radar. They’re closing these mining operations for other reasons altogether.
It’s also important to remember that China’s Bitcoin hashrate dominance was already on decline before the mining ban.
“According to Arcane Research, CBECI numbers say that:China’s share of total Bitcoin mining power has declined from 75.5% in September 2019 to 46% in April 2021 — before the restrictions on Chinese miners were even imposed. That figure is much lower than the older estimate of 65%.That’s a sharp decline. Why did China’s miners lose so much ground before the ban?”
None of this invalidates Pantera Capital’s original thesis, though. “The transition to renewables is well underway,” that certainly seems to be the case. And the Bitcoin hashrate keeps climbing.
Do Bitcoin Halvins Imply Cuts In Energy Consumption?
Another interesting idea present in the mentioned newsletter is this one:
“Bitcoin has a built-in mechanism to reduce energy consumption over time. The number of bitcoin issued in the every-ten-minutes block reward is cut in half every four years. Ceteris paribus, the amount of electricity Bitcoin consumes will be cut by 50% every four years. For comparison, the Paris Accord only requires 7% cuts every four years.”
Of course, when related to fiat currencies, Bitcoin’s price fluctuates. So, the value of every Bitcoin stays the same, but the price might – and usually does – increase more than twofold. Even though the miner’s rewards are cut in half, their earnings might increase. That extra money could bring even more competition and a Bitcoin hashrate increase with it.
Taking that into account, Pantera poses:
“Perhaps a more realistic scenario is if the price of bitcoin were to double every four years in parallel with the halvings – putting bitcoin at $320,000 /BTC in 2032 – electricity consumption would be no greater than it is today.”
Enough About The Bitcoin Hashrate, What About The Price?
Another point that the newsletter makes is this one.“This is China’s third ban of Bitcoin. The reverse hex is still working – the price is up 57%.”
Is this a bullish signal? Bitcoin’s price has “only” increased by 57% since the Chinese mining ban sent the Bitcoin hashrate in death spiral for a few seconds. Bitcoin paid the price and resisted sabotage like a hero. We’re not sure if a “reverse hex” could be considered reliable information, but… maybe this IS a bullish signal?Source