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Bitcoin dropped by over $7,000 USD in the course of an hour to lows of $52,000 USD following an alleged hash rate crash.
After trading in a healthy range, tagging over $60,000 USD earlier in the week, the close of the weekend saw Bitcoin dropping by over 10% from $59,000 USD to $52,000 USD within minutes. The price fall saw almost $10 billion USD liquidated within a day’s trading – a bearish surprise after Bitcoin has been experiencing a healthy trend over the past few weeks.
Why did Bitcoin experience such a rapid price reversal?
According to analysts, there are two possible reasons behind Bitcoin’s quick fall from trading just below $60,000 USD.
- A hate rate crash caused by a major power outage in the Xinjiang province in China – meaning a significant amount of Bitcoin mining operations were suspended.
- Rumours regarding the United State’s and alleged cryptocurrency-related regulations as a result of possible money laundering schemes.
Bitcoin hash rate
As popular Bitcoin statistician Willy Woo noted, the price of Bitcoin often trends along with the hash rate of the cryptocurrency According to the analyst, this could mean that the price trajectory downwards is a temporary one and that the recovery of the hash rate will probably lead to a recovery in price.
Price and hash rate has always been correlated.
This is BTC price vs today’s hash rate collapse (from the Xinjiang blackout). pic.twitter.com/mywEZLHlA0
— Willy Woo (@woonomic) April 18, 2021
The co-founder of Coin Metrics, Nic Carter, echoed similar sentiments, suggesting that the outage in China will unlikely lead to a historic impact on the cryptocurrency. He commented:
“If the outage lasts 3 weeks then bitcoin will have a historically large difficulty adjustment but I think that’s unlikely – either grid comes back online or miners will move their hardware… Based on data that comes in we could end up learning that Xinjiang is a smaller share of the network than we thought (cbeci is great but data is a year old now). My theory has been that HR is migrating out of China, would be great to see confirmation“.