Why is this ‘actually fantastic news for Bitcoin’?

With the ongoing unfolding of the ‘hashrate migration’ away from China, bitcoin’s hashrate dropped significantly.

According to Nic Carter of Castle Island Ventures,

“Bitcoin mining is a largely self-contained industry. Banning mining does little to inhibit bitcoin transactions or exchanges – they are totally distinct concerns.”

Peter Smith, Blockchain.com co-founder and CEO, recently stated his opinion that “it’s actually fantastic news for the Bitcoin ecosystem.” He added,

“You’re going to see a diversification of mining operations around the world. We’ve been seeing that trend over the last two years, as large mines are built in Europe, the U.S., and a variety of other geographic locations—but that trend is going to accelerate hard now.”

While several analysts concurred on the point of view that the reduced hashrate need not be a concern, in the long run, they also warned of its short-term effects. Chinese journalist Colin Wu stated,

Further, Zack Voell of Compass Mining mentioned that most of the top mining pools lost a minimum of 10 percent hashrate, and several were down between 30 percent to 80 percent. He added,

As documented by Glassnode, miner revenue experienced a setback of 80 percent since May.

Difficulty adjustment:

An anticipated reduction in the soon to occur Bitcoin mining difficulty adjustment was another repercussion of this development. As per Glassnode data,

It is the largest drop in hash rate in the era of industrial mining. As of today, mining difficulty is expected to drop by ~25% this Friday.”

The reduction in the mining difficulty and hashrate likely reflected the overall extent to which the shutting off of the mining farms in  Xinjiang and Sichuan impacted Bitcoin. Those Bitcoin miners that continue to operate may attain a larger share in the mining rewards following the next difficulty adjustment.

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