Bitcoin hash rate has dropped to the lowest level since the beginning of November. This is not surprising because a large percentage of Bitcoin mining comes from China. Mining operations in China began to decline due to the pressure on cryptocurrencies by Chinese authorities.
What is Bitcoin hash rate?
Bitcoin’s network hash rate is a measure of the calculated strength of the largest cryptocurrency, Bitcoin. Hashrate is an important security metric. The more computing power in the network, the stronger its security and overall resistance to attacks.
While the exact hash power of Bitcoin is unknown, it is possible to estimate the hash rate from the number of blocks formed and the current block difficulty. The hash rate has dropped 46% since its highest level in mid-May. The Bitcoin hash rate is currently 91.2 EH/s (quintillion hashes per second), close to half of the 171.4 EH/s high posted six weeks ago.
Figure 1. Bitcoin total hash rate.
Bitinfocharts reported a drop in mining profitability from $0.449 per day to $0.226 per terahash per second.
A higher hash rate means more competition among miners to validate new blocks. As mentioned earlier, the decline in hashrate and mining profitability is due to continued pressure from Chinese authorities to Bitcoin mining facilities across the country. Over the weekend, major mining operations in China’s Sichuan province were closed and images were shared on social media.
On June 18, authorities in the western part of Sichuan ordered the shutdown of local Bitcoin mining operations. In late 2019, CoinShares estimates that Sichuan has more than half the global hash rate and attracts miners with cheap abundant hydropower.
According to a CNBC report, Castle Island Ventures partner Nic Carter noted that Bitcoin’s hash rate has plummeted and said, “It seems likely that installations across the country will be shut down.” Carter predicted that at least half of Bitcoin’s entire hashrate will eventually leave China.
What does this mean? The decrease in the Bitcoin hash rate is a very important indicator for security. The higher the hash rate, the greater the security. The reverse of this is also true. The hash rate has dropped to levels not seen since November 2020. The hash rate was much lower in the past, but there were no potential hacking concerns.
It is believed that the drop in the hash rate is temporary and miners in China will try to move their equipment and offices to other “Miner-friendly” countries. An example of places to move would be North America, specifically the state of Texas.