Bitcoin Miners Confront New Chinese Crackdown as Xinjiang Shutdown Lowers Hashrate by 8%

Recent enforcement actions in China's Xinjiang province have led to the shutdown of around 400,000 ASIC miners, resulting in an 8% decline in Bitcoin's hashrate. This situation has forced miners to sell their assets at record-low prices, adding selling pressure to an already struggling Bitcoin market.

Key Takeaways

Xinjiang's crackdown has taken around 400,000 ASIC miners offline, reducing Bitcoin hashrate by approximately 8%.
China's mining crackdown plays a significant role in the current selling pressure on Bitcoin.
Bitcoin’s hashrate has declined from 1,160 exahashes per second (EH/s) in October to 1,045 EH/s in December.
Network hashrate reductions are being exacerbated by increasing energy costs and declining Bitcoin prices.
Hashprice has reached an all-time low, affecting miners' profitability.

Bitcoin hashrate drops after Xinjiang mining crackdown.

The Impact of China's Actions on Bitcoin Mining

Bitcoin mining operations in the Xinjiang province of China have been halted due to renewed crackdowns from Beijing, according to recent industry reports. This enforcement has resulted in roughly 400,000 mining machines going offline, significantly impacting the network hashrate.

According to analyst Bull Theory, this shutdown has contributed to an 8% decrease in Bitcoin's network hashrate, which is notable as China accounts for about 14% of the world's total hash power. Bull Theory indicated that the increased selling pressure on Bitcoin is heavily influenced by this crackdown.

The analyst pointed out that Asian investors likely began selling their holdings weeks prior to the crackdown, anticipating further restrictions. On-chain data supports this, showing a rise in selling activity from long-term holders over the past two months. Consequently, mining farms that have been shut down are now forced to liquidate their Bitcoin reserves and equipment to manage their financial losses.

Throughout the fourth quarter, Asian exchanges like Binance, Bybit, and OKX have reported consistent net selling, while U.S. exchanges, such as Coinbase, have continued to exhibit net buying trends.

Bitcoin's hashrate experienced a significant decline of 10%, dropping from approximately 1,160 EH/s in October to around 1,045 EH/s in December. This has resulted in three consecutive negative difficulty adjustments, as reported by mining pool operator Luxor.

Luxor attributed this trend to several factors: decreasing Bitcoin prices, which are pushing older mining hardware into unprofitability, regional enforcement actions that are reducing mining capacity, and increased energy costs for the winter leading to seasonal mining reductions across North America.

In line with this downturn, the hashprice, which indicates expected earnings based on a specific hashrate, has hit a historical low, further squeezing miners' profit margins. Bitcoin has been trading near the lower end of its established range since late November, struggling to recover from recent highs.