Bitcoin Mining Hashrate Rebounds as China Secretly Mines 21% of Network Despite 2021 Ban

The Hardware/Software Landscape

The Bitcoin mining landscape in mid-May 2022 presents a paradox that would have seemed impossible just a year earlier. Despite China’s sweeping ban on cryptocurrency mining enacted in June 2021, the country has quietly re-emerged as the second-largest contributor to Bitcoin’s global hashrate. New data from the Cambridge Digital Assets Program reveals that China now accounts for approximately 21% of the network’s total computing power, trailing only the United States at 38%.

This revelation comes at a time when the Bitcoin network itself is demonstrating remarkable resilience. The hashrate has continued to climb through the turbulent market conditions of May 2022, even as Bitcoin’s price crashed below $30,000 for the first time since December 2020. Mining hardware — predominantly application-specific integrated circuits (ASICs) from manufacturers like Bitmain and MicroBT — continues to operate across six continents, with the geographic distribution becoming increasingly diverse since China’s original crackdown.

The Terra/Luna collapse that dominated headlines in the second week of May sent shockwaves through the entire crypto ecosystem. Bitcoin plunged to an intraday low of $26,700 on May 12, and by May 14, BTC was trading around $29,000 to $30,100. For miners, this price action created a squeeze: operational costs denominated in fiat currency remained fixed while BTC revenues declined sharply. The margin between mining profitability and electricity costs narrowed considerably for operators running older-generation hardware.

Hashrate and Difficulty

Bitcoin’s hashrate has shown contradictory signals during the May 2022 turbulence. While the network’s total computational power has trended upward on a macro level, the Terra-induced price crash created short-term dislocations. The network difficulty — which adjusts approximately every two weeks to maintain a ten-minute block time — has been reflecting the broader trend of increased participation from regions outside China.

The Cambridge data paints a fascinating picture of how Chinese miners adapted to the ban. Rather than ceasing operations entirely, a significant proportion of mining operations reportedly used foreign proxy services to disguise their activities. VPNs, offshore hosting arrangements, and pool connections routed through other jurisdictions have allowed Chinese facilities to continue contributing substantial hashrate to the network. The 21% figure represents a remarkable rebound from the near-zero levels immediately following the June 2021 ban, when hashrate plummeted and the network experienced its largest difficulty adjustment in history.

For comparison, in September 2020 — before the ban — Chinese miners accounted for roughly 67% of global hashrate. The decline to 21% represents a massive redistribution, but the persistence of operations underscores the difficulty of enforcing mining prohibitions in practice. The decentralized nature of Bitcoin mining means that individual operators can relocate or conceal operations with relative ease compared to centralized industries.

Profitability Metrics

Mining profitability in mid-May 2022 has compressed to levels not seen since the crypto winter of 2018-2019. With Bitcoin trading between $28,000 and $30,000, miners using older Antminer S9 or similar legacy hardware are operating at or below breakeven in many regions. Only operations with access to electricity priced below $0.05 per kilowatt-hour — typically those in regions with abundant hydroelectric or stranded gas resources — are maintaining comfortable margins.

The publicly traded mining companies have not been spared. May 2022 was brutal for mining stocks: Marathon Digital Holdings (MARA) fell 34.25%, Riot Blockchain (RIOT) dropped 28.74%, and Hut 8 Mining (HUT) declined 28.37%. These declines outpaced Bitcoin’s own monthly loss of 15.6%, reflecting the leveraged nature of mining equities to cryptocurrency prices. Canaan (CAN), one of the few mining hardware manufacturers publicly traded, fared slightly better with only a 2.09% decline, as hardware demand remained somewhat insulated from spot price volatility.

The Luna Foundation Guard’s emergency response to the UST depeg — which involved purchasing and subsequently selling approximately 80,394 BTC — added additional selling pressure to an already fragile market. This massive Bitcoin liquidation by a single entity effectively transferred volatility from the Terra ecosystem directly onto the broader market, creating a double whammy for miners already struggling with compressed margins.

Environmental Impact

The geographic shift in mining has meaningful implications for Bitcoin’s environmental footprint. The United States’ dominant position at 38% of global hashrate means a larger proportion of mining is occurring in jurisdictions with increasingly stringent environmental regulations and access to renewable energy sources. States like Texas, with its deregulated power grid and abundant wind energy, have become mining hubs partly because renewable power can be competitively priced.

However, the persistence of Chinese mining — much of it likely powered by coal and natural gas in provinces like Xinjiang and Sichuan — complicates the environmental narrative. The clandestine nature of these operations means there is limited transparency regarding their energy sources, making it difficult for researchers to accurately assess the network’s true carbon intensity.

The irony is that the ban itself may have inadvertently slowed the transition to greener mining. Before the crackdown, many Chinese operations were located in regions with seasonal hydroelectric power. The ban disrupted these operations and forced some miners to relocate to jurisdictions where fossil fuels dominate the energy mix, at least temporarily.

Strategic Outlook

Looking ahead, the Bitcoin mining industry faces a period of consolidation and strategic recalibration. The current price environment around $30,000 is likely to accelerate the retirement of older, less efficient mining hardware, which could temporarily reduce hashrate growth. However, next-generation machines from Bitmain (Antminer S19 XP) and MicroBT (Whatsminer M50 series) offer significantly better joules-per-terahash efficiency, allowing well-capitalized operators to maintain or expand production even at lower BTC prices.

The Cambridge hashrate data also suggests that regulatory crackdowns have limited long-term effectiveness against Bitcoin mining. The network’s decentralized architecture, combined with the economic incentives of mining rewards, creates powerful motivations for operators to find ways around prohibitions. As long as Bitcoin maintains significant market value — and at $30,000 it remains orders of magnitude above its early years — mining will continue to attract participants globally.

For investors watching the mining sector, the key metrics to monitor include network difficulty trends, publicly traded miner hash rate growth, and energy cost arbitrage opportunities. The companies that survive this profitability squeeze will emerge with larger market shares and more efficient operations, positioning them for significant upside when BTC prices eventually recover. The Terra collapse, while devastating for the broader crypto market, may ultimately serve as a catalyst for a more mature and resilient mining industry.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency mining involves significant risk, including the potential for total loss of investment. Always conduct your own research before making any investment decisions.