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That Bitcoin ‘hash crash’ that happened when China cracked down on mining? It’s over

September 3, 2021, 8:10 AM UTC

Call it the “hash crash”—the steep drop in computing power for the Bitcoin network as Chinese operations pulled the plug amid the government crackdown. 

But whatever term one might use, it’s basically over now. The hash rate, a measure of computing power used in mining and processing, has jumped as much as 55% from early July, when it hit an almost two-year low. Prices for the token also recouped more than half of its losses since its April peak and traded at around $50,000 on Thursday. 

The reason for the recovery? Chinese crypto miners who were forced to pull the plug on their energy-hungry machines following a midyear government crackdown may have already begun the process of turning them back on overseas, BIT Mining Ltd. vice president Danni Zheng said. 

Some mining machines pre-sold early this year were delivered to overseas buyers in the past few months, with most of these having strong computing power, she said. Running up against government-imposed deadlines to get rid of their machines, miners fled to countries like the U.S. and Kazakhstan where the regulatory framework is more crypto-friendly. Before China ordered the late May crackdown on mining and trading as part of broader efforts to control financial risks, the nation amassed about 65% of the world’s Bitcoin mining power. 

U.S.-listed BIT Mining considers itself one of the lucky ones, having made plans to expand into offshore markets long before the crackdown. “We’ve always wanted to establish our business in the U.S and Kazakhstan from day one, and we decided to build our mines there before the policy came out,” Zheng said.

Despite more negative news flow from Beijing, with a People’s Bank of China official saying last week the digital asset has no real value support, she thinks the worse may be over for now. Chinese authorities, preoccupied with a sweeping crackdown on sectors from online gaming to after-school tutoring, haven’t come up with any new regulations in the last few months. 

“I think it’s safe to conclude that what we have now domestically is probably the toughest rule ever,” she said. “The worst scenario has occurred.”

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