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Valarhash Refused Bitcoin Mining: Why Did The Largest Chinese Mining Pool Make This Decision?

Valarhash, the Chinese mining operator Bitcoin, suspends the flagship cryptocurrency mining. This became known from local media. One of the reasons for this decision was the uncertainty and precarious market position of Bitcoin due to the spread of the pandemic and the recent crushing failure in March.

Earlier, the largest player in the crypto industry showed extremely high rates. Valarhash manages two pools, Bytepool and 1THash, which at the end of 2019 accounted for more than 9% of all network capacities. Sikuhan became the epicenter of the active development of mining, not only in China but throughout the world. According to crypto experts, in May 2019, 54% of all Bitcoin mining capacities were concentrated here.

After launching in 2019, Valarhash provided a hash rate for Bytepool of 4,000 petachas per second (PH/s). After the collapse of Bitcoin, the level of cryptocurrency mining has declined tremendously. According to BTC.com, the Chinese BTC pool has reduced activity to a critical low since April 4, 2020.

Why did the largest Chinese mining operator suspend the Bitcoin pool?

Valarhash has not yet officially confirmed the refusal to mine Bitcoin. Many analysts believe that this decision was caused by a decrease in the profitability of Bitcoin mining by 50%. Although in China the cost of electricity is relatively low, miners are looking for alternatives due to the instability of Bitcoin. Today, the hash rate has decreased by half and amounts to 2,000 PH/s.

Mining companies that have existed on the market for a long time have advantages, unlike Valarhash. Due to the high profit received earlier from operations related to Bitcoin mining, they were able to increase capital reserves. Also, most of these companies receive additional cash flows from trading fees on exchanges. 

Thus, the fall of Bitcoin, a decrease in the level of hashing was a lesser blow for the mining companies created earlier. In turn, the Chinese mining pool Valarhash has high operating costs in the absence of additional cash flows.

Signs of a possible deployment of this scenario for Bitcoin mining were recorded in March 2020. Valarhash has announced the launch of a program aimed at improving cash flows. In particular, in March, an advertisement was launched about the lease of 1THash capacities for miners.

Analysts believe that the failure of the Chinese mining pool Valarhash from Bitcoin can dramatically change the paradigm of the cryptocurrency market.