In April, Bitcoin crashed to $52,000 after crossing the $60,000 benchmark. Apart from the upcoming crypto regulations from the United States, several experts blamed the crash on a drop in hash rate. As per the reports, there was a major power outage in Xinjiang, China, which disrupted the activities of Bitcoin miners.
Although many analysts have claimed that the recent crypto market corrections were fueled by an announcement from Tesla and a clampdown on crypto mining activities by Chinese regulators, Bitcoin’s hash rate has dropped in Sichuan, China, following limitations on power usage.
Earlier this week, the State Grid in Sichuan’s Aba County issued a notice demanding that households and local enterprises limit their power usage amid surging utility demand. Aba encompasses a significant portion of the state’s hydropower, and the notice was specifically targeting all operations located in the region’s “Hydro-electricity Consumption Industrial Demonstration Zone.”
For some perspective, these zones were specifically created by the government to incentivize “power-intensive industries” to use cheap hydroelectricity during the summer months. As expected, many Bitcoin mining facilities are reportedly operating in these industrial zones.
That being said, any activity that disrupts the power distributed to these facilities could potentially affect Bitcoin’s hash rate and ultimately, the price of the digital asset.
Connecting the dots
Data on Blockchain.com reveals that the total hash rate (TH/s) of the Bitcoin network peaked at 180.67 million TH/s on May 13, representing a 37% rebound from the April incident. Meanwhile, since May 16 when Sichuan miners allegedly went offline, the total hash rate of the Bitcoin network has dropped from 172.36 million TH/s to 150.653 million TH/s.
The impact of these Chinese mining facilities is further buttressed by the total miner revenue. On-chain analytics site Glassnode reports that the total miner revenue has dropped from 1.23 billion to 692.16 million, representing a nearly 50% crash.
The timeline for the dropping hash rate from Chinese miners coincides with Bitcoin’s flash crash down to $37,000 on Wednesday. Although Musk’s tweets and massive futures liquidations played a part in last week’s sell-off, the power outage in Sichuan is likely the culprit behind this week’s bloodbath.
As of press time, the region’s state grid is yet to provide a timeline on when the current power bottlenecks will be resolved. However, another report from the China Times claims that Bitcoin miners may go online after May 25.