There has been a slump in the hash rate of Bitcoin (BTC) and according to mining data aggregators in the crypto space, this is mainly because the wet season has come to an end in the Chinese province of Sichuan. As this particular region is predominantly dependent on hydroelectric power, they have a large surplus of energy during the wet season, which has dried up now quite literally. Therefore, a number of Bitcoin mining operations are now moving over to different jurisdictions. On October 26th, 2020, Thomas Heller of the mining blog by the Hashr8 reported that nearly 22 exahashes per second (EH/s) had left the Bitcoin network in mining power.
According to weather forecasts, this is tandem with the wet season coming to an end just a day before in Sichuan. Digital Currency Group’s subsidiary that focuses on crypto mining, Foundry also had Kevin Zhang estimate a drop of 20 EH/s approximately. According to Zhang, BTC’s average hash rate for seven days was about 132.9 EH/s. However, this is in direct contrast to the everyday hash rate, which has been tagging consistently at 112.9 EH/s. In turn, Blockchain.com also estimated that the hash rate had declined between October 24th and October 25th and it went from 151.1 EH/s to directly 116.3 EH/s.
The Sichuan province in China is considered one of the largest crypto mining hubs that can be found in the world up till now. The hydroelectricity prices usually plummet during the rainy season in the region and this prompts numerous crypto mining operations to move to Sichuan in order to keep their costs low. Their crypto mining profitability is determined by the electricity costs they have to incur, which is boosted with low costs. The most recent estimates of data by the Bitcoin Electricity Consumption Index (BECI) of the University of Cambridge indicate that back in April 2020, almost 18.5% of the global hash rate of Bitcoin was generated by the province.
This was double of what it had been in the last rainy season. According to Hashr8’s Heller, a major number of the miners who are moving out of the Sichuan province will probably shift their operations overseas. If not, they are going to opt for the Xinjian and Inner Mongolia provinces. These two provinces were responsible for 30.1% and 7.7% of the global hash power back in April. Apart from that, it had also been estimated in 2018 that a whopping 80% of cryptocurrency miners in China had the habit of moving their mining operations to the Sichuan region during the rainy season.
They moved from a number of different regions in the country. Furthermore, some data had also been published by CoinShares back in 2019 in which it stated that nearly 54% of the crypto mining activity conducted globally originated from the Sichuan region in China. This is a very big number, but now that the rainy season is over, it appears that this will decline because electricity costs are going to increase for the miners.