- China cracked down on Bitcoin mining in June.
- That brought a dip in the network's hashrate.
- The remaining miners have been capitalizing on decreased competition.
Bitcoin miners are raking in the big bucks, two months after a crackdown on Bitcoin in China took most of the country's miners offline.
According to a report today from Arcane Research, daily Bitcoin mining revenue is up 10%, or $4.3 million, from the previous week. The transaction fees generated are up 22%, or $118,000 per day. Data from YCharts shows this to be a longer trend dating back to China's crackdown; miner revenue bottomed out for the year at $13 million on June 27. Yesterday, it was at $48 million, a $35 million difference.
"As protocol difficulty adjusted in response to the Great Migration," wrote Glassnode Insights in a report Monday, "miners who remained online have now seen their BTC income grow by 57% per hash to around 8.8 BTC/EH."
In mid-June, after several provinces expelled Bitcoin miners, China's national government ordered banks in the country to cut off their relationships with miners. An estimated 90% of Chinese Bitcoin miners went in search of other places to ply their trade, namely, receiving BTC rewards commensurate with the amount of computing power, or hashpower, they provide to the network.
The migration had profound effects on the blockchain's health. The hashrate, a measure of how much computing power is being contributed to the network, fell by about 50%, putting in perspective how much Bitcoin relied on Chinese mining.
Will Clemente, a lead analyst with mining consultant Blockware Solutions, wrote that more BTC began flowing to miners outside of China. "Less competition," he tweeted, equalled "higher profitability for the miners still operating."
This higher BTC revenue/Hash explains why miners haven’t been selling https://t.co/0zuyb0MzCy
— Will Clemente (@WClementeIII) August 17, 2021
But that's in BTC, not USD.
After reaching an all-time high of $63,595 on April 12, Bitcoin fell off in May and spent most of June and July submerged beneath the $40,000 mark. As a result, miners weren't eager to cash out their accumulated Bitcoin. Instead, they've been stockpiling it. The Bitcoin miner net position has now been positive since the beginning of July, indicating they are not selling as much as they are holding. It also suggests they believe the price is on its way up. The coin has indeed risen in value by $17,000 in the last month, possibly because lack of miner sales have put less downward pressure on the price.
The price might well be on its way up, but so is the difficulty of getting rewarded in Bitcoin on the network. Says Glassnode, "Over the course of the last two months, hash-rate has increased by around 25% from the lows." Bitcoin mining difficulty—which adjusts roughly every two weeks based on hashrate—has now increased twice in a row. In other words, the same amount of effort now gets you less compensation.
Assuming Bitcoin mining relocates outside of China in the months ahead, the competition for compensation may intensify further.