China’s Crypto Mining ban Sets Stage for Bigger Global Power Capacities in 2022

The Block’s 2022 Digital Asset Outlook Report has attributed a setting of the stage for bigger global hash power capacities in the coming year to China’s crackdown on crypto mining activities within its borders this year. 

The annual analysis points out that the Chinese government ban has created an opportunity for Bitcoin mining operations outside of China to grow and has already led to an infrastructure boom in North America, Russia, Central Asia and Europe. 

China took centre stage in the crypto world this year when it banned mining in the country and later followed the directive with a complete ban on crypto-related activities including transactions and promotion. The once-leading nation in terms of Bitcoin hashrate share as well as crypto trading activities cites the need for environmental impact consideration and fears of cryptos’ risks on its financial system as top factors that necessitated its actions. Market insiders add that China is also desirous of weeding out alternative non-regulated private digital currencies like Bitcoin to its soon to be launched central bank digital currency, digital yuan.

“If everything goes well as planned — that is major mining companies do not default on their monthly dues for miners or Chinese manufacturers don’t encounter serious regulatory or logistic issues – then Bitcoin hash rate in North America will first pass previous all-time-highs and grow massively in 2022,” a portion of The Block’s report says. 

It adds that due to the inability of the initial hosting availability globally to absorb the disconnected mining equipment from China following the crackdown, the projected growth is to be powered by the supply shortage that has shifted from previous mining equipment to operations with a global capacity focus. 

The report notes that more companies are in the race to order more equipment from manufacturers and build up power capacities for 2022. This, it says, is evident in at least 12 public and private mining companies including new players like Stronghold Digital and Terawulf which have each raised between $50 million and $650 million through IPOs, convertible notes, and equity issuances in the second half of 2021 for the said purpose. 

Securities and Exchange Commission disclosures made by 20 public (and pending listing) mining companies also show that they have a collective more than half a million units of the newest generation of Bitcoin ASIC miners on order and due for shipments by December 2022.

The report was released as Canaan announced that it has secured a follow-on contract from Genesis Digital Assets for 30,000 of its Avalon Miner Bitcoin mining machines in addition to the previously purchased 20,000 units. The order follows an option agreement signed previously between the two parties, granting Genesis an option to purchase up to 180,000 additional mining machines. 

The option entails three phases to purchase 30,000, 60,000 and 90,000 units of the mining machines respectively making it the Bitcoin mining industry’s largest mining machine deal to date. Like several others, Canaan started shifting its target customer base to large mining firms, listed companies, and fund-backed institutions like Genesis Digital Assets, Hive Blockchain and Mawson Infrastructure to maximise revenue.  

According to the co-founder of Genesis Digital Assets, Abdumalik Mirakhmedov, the newly-ordered machines are to support efforts to “rapidly scale our operations as we work towards our goal of increasing our capacity to 1.9 gigawatts by the end of 2023.”