Bitcoin mining has never been easier since China’s crackdown - miners stand to make higher profits

The level of difficulty for mining bitcoin plunged by 28 per cent on Saturday, according to data from BTC.com, to mark the largest drop in the network’s history
The most noticeable effect of China’s anti-mining efforts may be the acceleration of bitcoin mining outside the country, said cryptocurrency trader Scott Melker

Bitcoin

Business Insider

Published: 2:02am, 6 Jul 2021

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Bitcoin mining has become easier and more profitable, as the pool of miners competing to create tokens shrinks following China’s strict crackdown on the country's cryptocurrency operations.

The level of difficulty for mining bitcoin plunged by 28 per cent on Saturday, according to blockchain data service BTC.com, to mark the largest drop in the network's history.

Bitcoin’s hash rate, which reflects the computation power needed to validate tokens, is automatically adjusted by the network's algorithm every two weeks to make sure that miner productivity is balanced.

The recalibration on Saturday made it almost 30 per cent less difficult for mining systems to complete blocks to create the cryptocurrency, so a lot more cash may be going to the miners who remain online.

Cryptocurrency trader Scott Melker said in a tweet on Monday that his daily mining revenue jumped 50 per cent after the difficulty adjustment.

“The price of #Bitcoin dropped over 50 per cent in a matter of weeks and China banned mining, which accounted for roughly 60 per cent of the hashrate … and the network is unaffected,” the “Wolf of All Streets” trader said. “No bailouts, assistance from a government or manipulation required. Just the free market being free.”

The widespread shutdowns of mining facilities in China, which account for about 65 per cent of activity, would have probably resulted in hash-power drops greater than the ones seen previously and to greater network congestion, FRNT Financial CEO and co-founder Stéphane Ouellette told Insider.

But the most noticeable effect of the country's anti-mining efforts may be the acceleration of bitcoin mining outside China, he said.

Where bitcoin fails, central bank digital currencies will succeed

“During what has been a three-month period of sustained pressure on BTC mining in China, the coin's blockchain has not displayed any signs of adverse effects,” Ouellette said. “In fact, the BTC hash rate achieved an all-time high in April.”

“Over the past several months, the hash rate has seen declines correlated to sell-offs – something that has historically been typical behaviour for the network,” he said.

That reflects the impact of China ramping up its crackdown on mining by declaring digital tokens can no longer be used for business and the Inner Mongolia region setting up a hotline to report any outlying cryptocurrency operations that may still be active.

Bitcoin was last trading 5 per cent lower on Monday at around US$33,500, down about 47 per cent from its peak in April. It's still up 15 per cent year-to-date.

This article originally appeared on Business Insider