China’s Underground Bitcoin Mining Rebounds to 14% of Global Hashrate Despite Ban

Core Insights - Bitcoin mining is experiencing a resurgence in China, reclaiming a 14% share of the global hashrate and ranking third worldwide as of late October [1][8] - The resurgence is occurring despite the official ban on cryptocurrency mining that has been in place since 2021, with miners taking advantage of cheap electricity and a boom in data centers in energy-rich provinces [2][4] - Bitcoin mining activity in China reached 145 exahashes per second (EH/s) as of late October, while the USA leads with 389.3 EH/s and Russia follows with 160 EH/s [3] Mining Activity and Trends - Xinjiang has become the primary hub for the mining rebound due to its abundant and inexpensive electricity, which cannot be transmitted outside the province [4] - Canaan Inc., the second-largest Bitcoin mining machine manufacturer, reported that 30.3% of its 2024 global revenues came from China, a significant increase from 2.8% in 2022 [5] - CryptoQuant estimates that 15% to 20% of global Bitcoin mining capacity is currently operating in China [5] Market Conditions - The rebound in Bitcoin mining coincides with digital asset prices reaching record highs in October, with Bitcoin peaking at $126,000 before declining to approximately $86,500, a drop of about 31% [6] - The resurgence of mining activity in China is seen as a significant market signal, especially in light of potential policy shifts from Beijing regarding digital assets [7] Decentralization Concerns - The concentration of Bitcoin mining among three dominant nations, which control over 67% of the global hashrate, raises questions about the decentralization of Bitcoin [8] - The future of Beijing's stance on cryptocurrency mining remains uncertain, but the economic incentives driving underground operations in Xinjiang appear to be strong [8]