Whinstone CEO Chad Harris takes CNBC on a tour of the largest bitcoin mine in North America.
Bitcoin Mining has fully recovered after the Chinese crypto crackdown that took more than half of the world’s miners offline almost overnight earlier this year.
Recovery is measured by looking at the hash rate, a term used to describe the computing power of all the miners in the bitcoin network. China has long been the epicenter of the industry, with past estimates suggesting that 65% arrive 75% Bitcoin mining of the world happened there. But after Beijing expelled the country’s cryptocurrency miners in May, more than 50% Bitcoin’s hash rate has dropped off the global network.
As of Friday, data from Blockchain.com shows that the network has fully covered those losses. The network’s hash rate increased by about 113% in five months.
Kevin Zhang said: “Bitcoin resisted an attack by the Chinese nation-state that actually banned mining and the network rejected it.” of digital currency company Foundry, helped bring over $400 million in mining equipment to North America.
The increase in hashrate could bode well for the price of the world’s most popular cryptocurrency, which is down 30% month-on-month. According to bitcoin mining engineer Brandon Arvanaghi, who now runs Meow, a company that allows corporate treasury access to the cryptocurrency market, China’s ban is a clear “buy” signal.
But for Arvanaghi, the biggest takeaway from this whole ordeal is the fact that bitcoin mining has survived its biggest stress test with a bit of drama.
“The bitcoin network withstood the attack of a major superpower and emerged stronger than ever in the six short months that followed. How can anyone argue, ‘But what if countries ban it? ?’ Again?” he say.
As half of the bitcoin network goes dark this spring, many experts have said that miners will be back online in North America. A lot of predictions have also been made about the timeline to restore the network to its previous high.
No one that CNBC spoke to thinks the network will recover by the end of the year.
Texas engineer and bitcoin miner Marshall Long — head of architecture at Rhodium Enterprises, a fully integrated bitcoin mining company that uses liquid-cooled infrastructure — told CNBC that he I was a bit surprised at its recovery speed.
“I think we will be here around the end of January, the beginning of February,” he said. Others think it will take longer than that, adding six to twelve months to Long’s prediction.
According to Zhang, the rapid recovery of the bitcoin network comes because the United States has laid the groundwork to become the new mecca for mining. Zhang said that in the United States, there’s “huge growth in demand, infrastructure construction and use of limited power sources. “
Companies in the US have been quietly ramping up their storage capacity for years, betting that with the right infrastructure in place, miners will open stores in the US when the time is right.
As bitcoin crashed in late 2017 and the broader market entered a multi-year crypto winter, there wasn’t much demand for large bitcoin farms. US miners saw their opening and jumped at the opportunity to deploy cheap money to build a mining ecosystem in the US.
“Large publicly traded miners have been able to raise capital to make large purchases,” said Mike Colyer, CEO of Foundry.
Core Scientific founder Darin Feinstein agrees that the mining infrastructure in the US is experiencing serious growth. “We are seeing a huge increase in mining operations looking to move to North America, mainly in the US,” he said.
Companies like Core Scientific continue to build up storage space during crypto winter to ensure the ability to plug in new equipment.
Alex Brammer of Luxor Mining, a cryptocurrency team built for advanced miners, pointed out that the maturing capital markets and financial instruments surrounding the mining industry also play a large role in the growth of the mining industry. rapidly growing industry in the US. Brammer said many U.S. operators were able to start expanding rapidly as they secured financing by leveraging their multi-year track record of profitability and existing capital as collateral.
Covid also plays a role.
Although the global pandemic has shut down a wide range of economies, government stimulus money has proven beneficial for US miners.
“All the money printing during the pandemic means more capital is needed to deploy,” Arvanaghi explains.
Arvanaghi continued: “People are looking for places to deposit their cash. The appetite for large-scale investments has never been greater. A lot of it has likely found its way into mining. Bitcoin mining in places outside of China,” continued Arvanaghi.
That gamble paid off. Data from University of Cambridge show that USA is now the number one destination for bitcoin miners, overshadowed China for the first time.
But the picture may not be as simple as it seems.
According to multiple sources, many miners who did not have enough resources to relocate have stayed in China, moving their operations underground. Some go “behind the clock”, drawing electricity directly from sources such as hydroelectric dams in the southern province of Sichuan. Others split their mining operations into much smaller farms around the country, with little attention from the authorities.
Whatever the reason behind bitcoin’s faster-than-expected recovery, bitcoin miner Alejandro de la Torre, who has spent years mining cryptocurrencies around the world, including in China and near this is especially in Austin, Texas — told CNBC that the bigger lesson here is the resilience of the global mining industry.
“I believe any black swan events that may come to bitcoin mining in the future will not be events,” de la Torre said.