Bitcoin, the world’s largest cryptocurrency, fell a whopping 14% to $ 51,541 on Sunday, reversing most of the major gains of the past week.
Bitcoin last traded 10% at $ 53,991 as of 1320 GMT, a whopping $ 12,000 below Wednesday’s record highs. Smaller rival Ether, the coin linked to the ethereum blockchain network, was down 10% to $ 2,101.
Data website CoinMarketCap called a blackout in China’s Xinjiang region, which is reportedly enabling a lot of bitcoin mining, for the sale.
Luke Sully, CEO of digital asset treasury specialist Ledgermatic, said in an email that people “may have sold on the news of the power outage in China and not the impact it actually had on the network.”
“The power outage exposes a fundamental weakness; while the Bitcoin network is decentralized, mining is not,” added Sully.
Some much-followed blockchain analysts on Twitter pointed to a sharp drop in the “hash rate” as a result of the outage.
Hash rate refers to the volatility index that measures the processing capacity of the entire Bitcoin network, and it determines the power that miners need to produce new Bitcoins.
Typically, hash rate shocks don’t cause price drops. A hash rate drop slows down transactions, making it ironically more difficult to move coins to exchanges for sale. The recent price drop is well within the limits of the typical volatility, it’s noise, not a signal, ”said Edan Yago, co-founder of the Bitcoin-based decentralized financing protocol Sovryn.
The withdrawal in Bitcoin also comes after Turkey’s central bank banned the use of cryptocurrencies for purchases on Friday.
Edward Moya, senior market analyst at OANDA, said cryptocurrencies were ripe for a downturn.
“The market has become overly aggressive and optimistic about everything,” said Edward Moya. “It could have been any bearish headline that could have elicited this response.”
Many cryptocurrency markets operate 24/7 and set the stage for price swings at unpredictable hours. Historically, retailers and day traders have taken the steps.
Despite the sudden sell-off, bitcoin is up 89% so far in 2021, driven by widespread adoption as an investment and currency, accompanied by the rush of retail money for stocks, exchange-traded funds and other risky assets.
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