Bitcoin Hashrate Drops as China Intensifies Crypto Scrutiny

Bitcoin has fallen by 5.6% over the last few days after 100 exahash per second (EH/s) of computing power went offline. This is a result of China’s renewed crackdown on cryptocurrency.

Hashrate refers to the available computing power on the Bitcoin network. It reached new highs this year, along with Bitcoin’s massive performance.

Chinese Miners Shut Down Over 400,000 Bitcoin Mining Machines

Talks about the decline of Bitcoin’s hashrate first surfaced on X on December 13. Nano Labs CEO Jack Kong disclosed that miners in Xinjiang province are shutting down.

Kong later confirmed the impact on Monday, noting that computing power is down 8% over the last 24 hours. According to him, this amounts to at least 400,000 machines being shut down.

They wrote:

“Xinjiang’s Bitcoin mining farms are shutting down one after another, and the U.S. wins without lifting a finger!”

The shutdown of this high number of miners is due to recent investigations into Bitcoin mining activity in the Xinjiang region. While bitcoin mining has been banned in China since 2021, it continues in provinces with cheap energy, such as Xinjiang. According to a recent Reuters report, China accounts for almost 10% of the global hashrate.

However, reports claim that miners promoting their operations on social media have sparked investigations by the central government. This has forced many to voluntarily shut down their operations, with around 1.6 gigawatt of computing power affected.

This was enough to cause the Bitcoin  7-day average hashrate to fall from 1,125 EH/s to 1,049.60 EH/s hashrate since December 12. It is the biggest decline since the 2024 halving.

Bitcoin Miners Pivoting to AI Amid Price Volatility

Interestingly, it is not just the renewed crackdown on mining in China that has caused the hashrate to fall. Industry experts also believe that more miners are pivoting to hosting high-performance computing (HPC) machines for  AI.

Braiins Mining CEO Eli Nagaar predicted that bitcoin hashrate would drop by 30% in 6 months. The expert noted that miners now have outside options in this cycle, given the drop in the Bitcoin price.

Nagaar noted that Bitcoin mining facilities can now be repurposed as data centers for AI, and this trend is expected to accelerate with the declining price. Firms such as Core Scientific, TeraWulf, CleanSpark, Bitfarms, MARA Holdings, Riot, and Bit Digital have all partially or wholly pivoted to AI.

Nagaar wrote:

“Power, capex, and sites can now be redeployed to Al/HPC with longer-term contracted revenue, lower volatility, better financing terms, fewer policy surprises In that world, BTC price doesn’t automatically pull hashrate back. Hashrate clears against the best risk-adjusted use of power, not just bitcoin price.”

The pivot to AI is not surprising, given the flagship asset’s volatile performance over the past few months. BTC is now trading around $85,000, with a nearly 4% decline in the past 24 hours.

Unsurprisingly, Bitcoin hash price has dropped to $36.80 PH/s. This continues the trend of low profitability for miners with the hash price stuck below $40 since mid-November, its lowest level ever.