Bitcoin mining difficulty declines by 16% as hashrate drop precedes China’s crackdown note

[HOCD1A035]

Bitcoin's mining difficulty saw a notable decrease around Sunday midnight UTC time as the network's hash rate has dropped significantly even before China's bitcoin mining crackdown comment.

On-chain data shows the network's mining difficulty adjusted to 21.05 Trillion at block height 685,440, which is a 16% drop compared to its recent all-time-high recorded on May 13.

In fact, Bitcoin's average block production interval already increased to 11.8 minutes between May 13, the last mining difficulty adjustment date, and May 21, when China's State Council iterated in a recent meeting that there needs to be a crackdown on bitcoin mining and trading activities in China.

That interval was 18% faster than the Bitcoin network's intended 10-minute-per-block production time, which also means the average hash rate between May 13 and 21 already dropped to around 147 exhashes per second (EH/s).

Following the China State Council's comment Friday last week, the seven-day moving average hash rate has remained relatively steady around the 150 EH/s level.  

As reported previously, the computing power connected to Bitcoin has declined since May 13 due to a few factors.

While some miners had started the migration process from Northern Chinese provinces to the hydro-electricity hub in Sichuan, the power plants in Sichuan have been limiting the supply to energy-intense industries including mining farms due to the delay of the rain this year. As a result, there has been a surging electricity demand from the general public, which had to be prioritized. 

It remains to be seen whether and how the Sichuan government will react to the State Council's high-level policy signal in terms of cracking down on bitcoin mining activities. 

Different from its counterparts in Inner Mongolia, where the energy is mostly based on fossil fuel, the Sichuan government is hosting a seminar next week to understand what the impact of a simple ban would have on the local hydropower economy. 

Meanwhile, some Chinese bitcoin miners are looking for energy capacities overseas to migrate their equipment out of China to hedge against regulatory uncertainties ahead.

[Silent Watcher]

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