China Can’t Seem to Stop Bitcoin Mining

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Last week, Cambridge University’s Cambridge Centre for Alternative Finance (CCAF) released an update to its heavily cited (and rightfully so) Cambridge Bitcoin Electricity Consumption Index (CBECI), which in part looks to uncover and share the geographic location breakdown of bitcoin miners globally.

The previous Cambridge update showed that China’s share of mining went from 34.3% in June 2021 to 0.0% in July 2021 following a crypto mining ban in the country. Last week’s update showed that China’s share of mining went from 0.0% in August 2021 to … 22.3% in September 2021.

Clearly something is up here, so let’s dive in. While we are there, we’ll also touch on two other bitcoin mining related topics: 1) hashprice and 2) mining company woes.

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China banned bitcoin mining in May 2021, and it showed up in the data. By July, there were virtually no miners mining in China. None in August either. Then, in September, almost all the miners who left came back. At least, that’s what the data shows:

Perhaps it’s not obvious so I’ll say it: That didn’t happen. Moving mining operations isn’t exactly easy. The bulk of mining operations isn't a handful of hobbyists messing around; Bitcoin has long since graduated from that. Most miners are more properly characterized as commercial operations, paying triple net leases for warehouse space and depending on fancy power purchase agreements for electricity.

Bitcoin mining operations look like this (check out this amazing photojournalism effort from my colleagues):

The reason the data looks like this is due to the data collection method employed by the CCAF. The CCAF partnered with bitcoin mining pools to collect geolocational mining facility data based on IP addresses (pools allow a lot of different miners to contribute to mining, and the reward is then split among them according to their processing contribution to smooth out individual miner income). Therein lies the issue and the CCAF warns as much, stating:

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