China Has Triggered a Bitcoin Mining Exodus

The man shooting the video wears a face mask, rimless glasses, and a white hard hat. He is traipsing near the entrance of a warehouse full to the brim with stacks of internet-connected machines sitting idle in half-darkness. As the man turns the camera around to showcase the machines, he says in Mandarin, “This is the stock for you. It hasn’t even started mining bitcoin.” The video, a sales pitch received via text by a cryptocurrency entrepreneur based in Switzerland, is just one of many similar messages that have been flowing out of China over the past two weeks.

China has long been the world’s epicenter of bitcoin mining, an energy-guzzling process to secure the cryptocurrency network and mint new bitcoins via specialized machines known as “mining rigs.” According to the University of Cambridge's Centre for Alternative Finance, over 65 percent of miners working on the bitcoin blockchain were based in China as of April 2021. But Chinese miners are now on tenterhooks following a top government official’s announcement, in a speech on May 21, that Beijing would start to “crackdown on bitcoin mining and trading behavior.”

Some miners reacted by scrambling to get rid of their rigs. According to Robert Van Kirk, managing director of US-based mining equipment marketplace Kaboomracks, Chinese miners are frantically “fire-selling” their equipment. Even if the crackdown announcement was not immediately translated into regulation, Van Kirk says, it appears that some miners have been put off by the hostility. “People mining there have realized that it may now be a riskier proposition to operate in China than they had anticipated,” he says. “They may be leaving, regardless of whatever determination is made.” As a consequence, Van Kirk says, used mining rigs are now being sold at a steep discount, in some cases as much as 40 percent lower than the usual price. This is higher than figures from a Reuters report this week, featuring an interview with Chinese mining machine manufacturer Canaan, which says that prices have fallen by 20 to 30 percent from early May.