Is the shutdown of 400,000 mining machines in Xinjiang, China, the behind-the-scenes culprit of the Bitcoin crash?

Approximately 400,000 mining machines in China’s Xinjiang region have been forcibly shut down, causing Bitcoin hash rate to plummet by 100 EH/s in a single day. Shortly after news of China’s sudden drop in mining power, Bitcoin’s price fell below the critical support level of $90,000 this week, reaching a low of $86,000. Analysts say that when miners are forced offline, it typically triggers a chain reaction: immediate loss of income, urgent need for liquidity to cover operational expenses or relocation, and forced sale of Bitcoin holdings.

China’s Mining Ban Reinstated: 400,000 Machines Disappear Overnight

(Source: Glassnode)

China’s stance on Bitcoin mining has once again turned tough. Although a mining ban was officially enacted in 2021, underground mining activities continued to expand nationwide, especially in regions like Xinjiang and Inner Mongolia with low electricity costs. According to Hashrate Index data, as of October, China accounted for about 14% of the global Bitcoin hash rate, reclaiming its position as the third-largest mining center worldwide.

The scale and speed of this crackdown on Chinese mining have exceeded market expectations. Jiang Zemin, former chairman of Chia Nan Group, revealed that approximately 400,000 mining machines in Xinjiang were forcibly shut down in a short period, leading to a roughly 100 EH/s decrease in China’s hash rate within 24 hours. This figure represents about 8% of the global Bitcoin hash rate and is one of the largest single-event hash rate drops. Such sudden and severe measures forced Bitcoin mining companies to act immediately, with many miners unable to even formulate contingency plans.

The timing of China’s mining crackdown is particularly critical. Less than a month ago, the market was still celebrating a recovery in China’s mining industry, believing that regulatory attitudes might have softened. However, this large-scale shutdown shattered all illusions, demonstrating that the Chinese government’s stance on Bitcoin mining has never changed. Access to low-cost electricity and surplus power in certain regions are key drivers for mining revival, but when regulation suddenly tightens, these advantages quickly turn into disadvantages, as large-scale mining infrastructure becomes easier to detect and seize.

For the global Bitcoin network, the 8% drop in China’s hash rate has multiple impacts. First, network security is temporarily reduced, as hash rate is the core defense against 51% attacks. Second, mining difficulty will decrease at the next adjustment, which takes about two weeks, during which block production will slow slightly. Third, the revenue structure for miners will change; remaining miners will share a larger reward, but miners forced to shut down in China face a survival crisis.

Miner Capitulation and Selling: Liquidity Crisis Triggers Chain Reaction

Bitcoin analyst NoLimit explained in detail how China’s mining crackdown has triggered Bitcoin selling. When miners are forced offline, the immediate loss of income is the most direct impact. Bitcoin mining is a capital-intensive business; miners need to continuously pay for electricity, equipment maintenance, venue rent, and labor costs. These fixed costs do not disappear when mining stops, but income drops to zero instantly.

In this liquidity crisis, miners face two choices: borrow or sell Bitcoin holdings. However, the underground nature of Chinese mining makes it difficult for miners to obtain traditional bank loans. Therefore, most miners can only choose to sell their Bitcoin inventories. NoLimit explained, “This creates real selling pressure, not the opposite.” When hundreds of thousands of mining machines shut down simultaneously, this selling pressure is amplified many times over.

A more serious issue is the cost of relocation. For Chinese miners wishing to continue operations, they need to move equipment to other countries or regions. This involves logistics costs, new venue rentals, electricity contract negotiations, and significant upfront investments. Against the backdrop of Bitcoin prices already down about 30% and transaction fees remaining low, miners’ profit margins are severely squeezed. Many Chinese miners find that relocation costs may exceed their expected continued earnings, leading them to choose complete exit, selling their mining machines and Bitcoin holdings at low prices.

Timing is key to understanding the impact of China’s mining crackdown. This enforcement action occurred after Bitcoin had fallen about 30% from its October peak, with miners’ profitability already under pressure. Persistently low transaction fees have caused miner revenue to reach recent lows, as miner income consists of block rewards and transaction fees. In this fragile moment, the sudden enforcement of China’s mining ban became the last straw.

Three Stages of Miner Dilemma Triggered by China’s Mining Ban

Stage 1 (Immediate Impact): 400,000 mining machines shut down, miners’ daily income drops to zero, fixed costs (electricity, venue, labor) still need to be paid

Stage 2 (Liquidity Crisis): Miners lack cash flow, forced to sell Bitcoin inventories to cover overdue expenses and relocation costs

Stage 3 (Long-term Effects): Some Chinese miners exit the industry, sell mining machines at low prices, and hash rate experiences permanent loss

Rise and Fall Cycle of China’s Underground Mining Industry

China’s relationship with Bitcoin mining has been full of drama. Before 2021, China was the world’s largest Bitcoin mining hub, accounting for over 65% of global hash rate at times. However, in May 2021, the Chinese government issued a comprehensive ban on Bitcoin mining, citing energy consumption and financial risks. This ban triggered the largest hash rate migration in history, with millions of mining machines forced to shut down or relocate to Kazakhstan, the US, Canada, and other countries.

Nevertheless, China’s mining industry did not disappear entirely but shifted underground. Low electricity costs, abundant hydropower and wind power resources, and a mature supply chain ecosystem make China still attractive to Bitcoin miners. Especially in western regions like Xinjiang and Inner Mongolia, with large amounts of idle power capacity, local enforcement varies. Between 2021 and 2024, China’s mining industry quietly recovered, and by October 2024, it had regained about 14% of the global hash rate.

The reason why this crackdown hits so hard is that the market underestimated China’s actual share in global Bitcoin mining. When 14% of the global hash rate suddenly faces regulatory pressure, it not only directly impacts network security and block production but also creates enormous uncertainty. Investors begin to worry: Is this crackdown an isolated event, or the start of a comprehensive underground mining purge? If the latter, more Chinese miners may be forced to shut down, and selling pressure could persist for weeks or even months.

From a broader perspective, China’s mining crackdown reflects the country’s contradictory attitude toward Bitcoin. On one hand, the Chinese government explicitly opposes Bitcoin as a currency, fearing it challenges the sovereignty of central bank-issued money. On the other hand, China has the most complete global mining supply chain, from mining hardware manufacturing to electricity supply. This contradiction causes China’s mining industry to cycle between “total ban” and “underground revival,” with each tightening policy triggering market turbulence.

For the global Bitcoin market, the uncertainty of Chinese mining is a long-term risk factor. As long as bans remain, underground mining will persist, bringing with it the risk of sudden shutdowns. This unpredictability makes Bitcoin miners relying on Chinese electricity a destabilizing factor in the market. In the future, the global mining industry may further concentrate in countries with clear regulations, and China’s share could continue to decline.