Earlier in April, an accident at a Chinese coal mine in Xinjiang sent Bitcoin network’s hash rate plummeting 30% in a span of a day, which crippled the major cryptocurrency’s rally.
Now, Bitcoin’s hash rate is suffering a similar loss as miners based in Sichuan, China face limitations on power usage.
The State Grid in Sichuan’s Aba county — which encompasses a significant portion of the region’s hydropower — issued a notice earlier this week that required local enterprises and households to limit their power consumption as the province was met with a surging utility demand.
The notice was specifically aimed at all operations located in the region’s “Hydro-electricity Consumption Industrial Demonstration Zone.”
These zones were created by the government as a form of incentive for “power-intensive industries” to utilise cheap hydroelectricity during summer months. Many of the Bitcoin mining facilities were allegedly operating in these government-sanctioned industrial zones.
Explaining a Potential Reason for Bitcoin’s Recent Price Action
Per Blockchain.com, Bitcoin network’s total hash rate (TH/s) peaked at 180.67 million TH/s on March 13 — an approximate 37% rebound from the incident in late April. Since May 16, which was the day Sichuan miners went offline, the total hash rate dropped from 172.36 million TH/s to 150.653 million TH/s.
The sheer size of the Chinese mining facilities and the implications of their shutdown can also be seen through total miner revenue.
According to on-chain analytics site Glassnode, total miner revenue dropped from $1.23 billion to as low as 692.16 million — constituting nearly a 50% crash.
This was precisely when Bitcoin suffered a flash crash down to $37,000 earlier this Wednesday. While Elon Musk and a mass futures liquidations were certainly factors that led to a mass sell-off earlier last week, the power outage in Sichuan is likely what led to this week’s bloodbath.
The Sichuan State Grid didn’t provide a timeline as to when the current power limitations in the Sichuan region will be lifted. However, a report from the China Times stated that Bitcoin miners may go online after May 25.
Considering that Bitcoin failed to retest its high following the first power outage in China, it’s hard to imagine that its price will recover anytime soon.
Featured image from UnSplash
