What Made Bitcoin Network Hashrate Drop by 33%? – Recent Floods in China and How those Affected Bitcoin

It’s no mystery that China has got the biggest crypto mining farms in the world. According to certain reports, about 70% of the total Bitcoin hashrate comes from China.

Some days ago Jinse, a Chinese news company, has reported that due to floods in the Sichuan province of China, several big mining farms have been heavily damaged by the rising waters. Like by coincidence, the day of the flood Bitcoin network hashrate dropped by 30%:

The Chinese news site has posted several photos of ASICs and GPUs in the mud (something really painful to look at for a tech junkie like me). According to their reports, “at least tens of thousands of mining machines have been flooded”. Dirty water saturated with salts and other minerals is indeed the nightmare of any electronic circuitry. Besides that the flood has caused power shortages and other issues that could have affected mining.

That being said, does that mean that one flood has destroyed (or made temporarily stop) the equipment that was responsible for about 33% of the global hashrate? Is Bitcoin mining really centralized at the point that one single region of China produces 33% of the total Bitcoin hashrate?

Probably, or probably not. Let’s take a look.

First of all, the photos Jinse has shared with us showcase ASICs (that look like Bitmain Antminers), as well as GPUs. The latest cannot mine Bitcoin though, so I would speculate that those GPUs have been mining other (GPU-friendly) coins.

Such a huge amount of dead/damaged GPUs should affect the hashrate of GPU-minable coins, right? Following that logic, I’ve checked the charts for what I believe are the most popular GPU minable coins and I haven’t seen any significant hashrate drop in the period of the flood.

This makes me believe that those farms in Sichuan do not have a significant share in the network hashrate of GPU-minable coins. That’s one thing to keep in mind. According to statistics, Sichuan is one of China’s most favorable places for mining farms due to low electricity costs. Hopefully, this could mean that GPU mining is not as centralized in China as some might picture.

What about Bitcoin?

If we look back into Bitcoin’s history, we see a lot of dips in its network hashrate. Those dips are so common I can almost say they are a trend. For example, check this one that happened June the 10 (in orange):

It’s also impressive how quickly the hashrate recovered from the most recent dip. According to the news, the mining equipment that has been damaged by the flood can not be repaired. Have they restocked at least part of the machines and repaired/rebuilt the farm buildings in less than a day?

Now, about the equipment that has been saved from the flood. Even if most of the equipment was saved, relocating a whole mining farm to a different place in a span of few days to resume mining sounds impossible to me. Just picking up and boxing several tens of thousands of devices should take at least a week. There is no way those mining farms could have done everything so fast.

Moreover, Bitcoin network hashrate fluctuates on a daily basis. Certain peaks or dips are really big with a hashrate fluctuation of to up to 30%. There are short peaks, as well as ones that create a sort of plateau and last for one or two days. Same can be said about the dips.

(Red lines are all the same length)

In Conclusion

While I am not saying that the flood did not affect the global Bitcoin hashrate, I see a lot of peaks and dips in the global hashrate chart history. In fact, I have marked with orange two events situated one month apart from each other that have almost the same exact shape. Not sure if either has been caused by a flood.

Can the initial question be answered? Was the dip caused by the flood or is it merely a coincidence? Is one Chinese province really producing 33% of the global hashrate? I would love to read your opinion in the comments section below:

Thank you for reading. As always, your comments, suggestions and questions are welcome.

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