Over the course of the last three weeks, Chinese miners have reportedly been rushing to the country’s Sichuan region to take advantage of cheap hydroelectricity that is being generated in large amounts by the region’s rainy season.
According to a report from Bitcoin.com, the migration of Chinese miners during the rainy season has been a regular occurrence over the last several years.
Sichuan’s Glut of Electricity is a Hot commodity For Small-Scale Miners, but Larger operations Prefer to Partner with Local Governments
At one point, 70 percent of all of the hash power that China was producing was estimated to be coming out of Sichuan–journalist Eva Xiao reported that this is partially due to the Sichuan’s glut of electricity during the rainy season. “In 2016, for instance, overcapacity from hydropower stations in Sichuan and Yunnan amounted to a whopping 45.6 terawatt hours,” she wrote on Medium.
“To put that into perspective, the entire US generated 4,100 terawatt hours of electricity in the same year. By partnering with these power stations, cryptocurrency miners get access to discounted electricity rates in exchange for a cut of the mining revenue.”
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However, as prices continued to rise, larger Chinese mining operations ended their migration patterns and sought subsidies and partnerships from local governments instead.
“If a company doesn’t want to worry about the stability of their electricity source, they make it public — they work with the government,” says Zhao Qianjie, vice president of crypto exchange BTCC, in Xiao’s report. BTCC closed its own mining pool business in November.
Mining Profitability Has Fallen Considerably
The migration may be a sign that miners see a window of opportunity to earn a larger profit from their efforts once again. Reports emerged in late 2018 that Chinese miners were attempting to sell off their mining gear en masse as the cost of Bitcoin mining began to outweigh the financial benefits.
Indeed, the rush to get out of the mining industry in China and elsewhere in the world is estimated to have caused a 30-percent decrease in “hash power” (power that’s used to process transactions on the Bitcoin network) from its all-time high. At its own highest point, China is said to have been responsible for 70 percent of all hash power on the Bitcoin network.