In May 2021, China started cracking down on crypto mining to protect its power supply and use it for manufacturing.
By mid-2021, Bitcoin’s hashrate, which measures the total computational power contributing to the blockchain network, fell more than 50%. The lower the hashrate, the less secure the network, opening it up to attacks. Since then, many Chinese miners have moved to places such as the US, Canada, and Kazakhstan and have quickly re-established operations.
The crypto market dipped after the China news, but had a mixed year in general. Bitcoin dipped below $50,000 in 2021 and hovered there, after reaching a high of $68,000 earlier in the year. The recovery of computational capacity shows that crypto mining has moved from a fringe activity run by hobbyists to a professionalized industry.
What does this mean for me?
Crypto mining has long been criticized for its high energy costs and poor environmental track record. However, as the industry adapts to criticism and moves toward renewable energies, it is set up for success.
Renewable power is plentiful and cheap, and this, in addition to the more institutional nature of crypto mining, has ensured that the industry has the scale and the durability to grow.
For crypto traders, news of the industry’s increasing robustness will be well received. As the industry matures, many of its weaknesses are being systematically addressed, with crypto mining being just one of them.
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