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China’s control over Bitcoin mining was waning before the crackdown

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Disgusting surprise! According to the latest CBECI update, China’s control over Bitcoin mining was already waning. The Cambridge Bitcoin Electricity Consumption Index shows that and much more, “provides an up-to-date estimate of the daily electrical load on the Bitcoin network. However, China is the incumbent. The recent government ban on Bitcoin mining left the world speechless, and this feels like another piece to solving that puzzle.

However, it doesn’t quite fit. According to Arcane Research, the CBECI numbers say that:

China’s share of the total Bitcoin mining power has decreased from 75.5% in September 2019 to 46% in April 2021, even before the restrictions were imposed on Chinese miners. That figure is much lower than the previous estimate of 65%.

Related reading | Why China’s Crackdown on Bitcoin May Be Just Beginning

That is a steep decline. Why did China’s miners lose so much ground before the ban? Did the Chinese government turn off the machines they supposedly own? Why would they do that? Is everyone missing an obvious explanation for all of this? It is also very interesting that the CBECI shows that the United States and Kazakhstan were growing at a tremendous rate before the ban.

BTCUSD Price Chart for 07/22/2021 - TradingView

BTC price chart on Bitstamp | Source: BTC / USD on TradingView.com

Bitcoin mining in the United States and Kazakhstan

Arcane Research processed the numbers and apparently:

During the same period, the United States’ share of the total Bitcoin hashrate increased from 4.1% to 16.8%, making it the second largest Bitcoin mining location.

It is followed by Kazakhstan, with a nearly six-fold increase in the hashrate percentage, from a mere 1.4% in September 2019 to 8.2% in April 2021.

That is curious. After the government ban went into effect and miners shut down their machines, we were concerned that Bitcoin’s hash rate would spiral to death. The big miner migration was on its way, and guess who the big predicted winners were:

Tons and tons of mining equipment are currently traveling to their new homes. There are reports of a large operation in Kazhakstan, a neighboring nation to China. There are also rumors that equipment and personnel are already settling in Texas. The US state is making an effort to become a Bitcoin mining capital and the efforts have apparently already paid off.

However, remember that everything the CBECI numbers show happened before the ban.

Is there something we are missing?

CEBECI, a graph showing the dominance of the Bitcoin hash rate

CEBECI, a graph showing the dominance of the Bitcoin hash rate

Country share of global Bitcoin hash rate | Source: Arcane Research

How do you get CBECI numbers?

The Cambridge Bitcoin Electricity Consumption Index explains the methodology they use:

The underlying techno-economic model is based on a bottom-up approach initially developed by Marc Bevand in 2017 that uses the breakeven point of different types of mining equipment as a starting point.

Since the exact electricity consumption cannot be determined, the CBECI provides a hypothetical range consisting of a hypothetical lower limit (floor) and an estimate of the hypothetical upper limit (ceiling). Within the limits of this range, a rough estimate is calculated to provide a more realistic figure that approximates the actual electricity consumption of Bitcoin.

So it is a very elaborate educated guess. However, it is based on real data and a variety of estimates. Can you tell us something about the curious results you obtained? Does the data tell a story that we are missing?

Related reading | How China Bitcoin FUD is reducing the cost of producing BTC

Last month, we raised a theory about the Chinese government trying to get rid of small hydroelectric plants. The whole situation is puzzling, so we asked the following questions:

The government may be trying to get rid of these plants. That would explain the tone of the article, it seems that it was trying to keep investors away from those hydroelectric plants. In light of this, China’s ban on Bitcoin mining could be part of an even bigger play. They are serious and methodically shaking things up there.

What could be its end? Is China simply trying to become carbon neutral and repair the original flow of the rivers? Or is there something else at stake here?

Everything the CBECI shows seems to be related to the answer to all these questions. However, at least one piece is missing. The mystery persists.

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