A power outage in China and a rumor from the US have likely sparked the worst Bitcoin downturn in a long time.
Bitcoin (BTC) suddenly crashed to a temporary low of $ 52,000 on April 18 today, a warning to crypto investors about how fragile the price development is, even in phases of strength.
Power failure and rumor cause a crash
As from the data of Cointelegraph Markets Pro and TradingView shows, Sunday morning was not very pleasant for fans of the market-leading cryptocurrency, because within a few minutes its price plummeted from 59,000 US dollars to just 52,000 US dollars.
After BTC / USD had already slipped below the support of $ 60,000 this weekend, the rate initially remained stable before it went down in one fell swoop today, making it a total of the last 24 hours Long positions worth nearly $ 10 billion were liquidated.
The crash of $ 7,000 in just one hour has been since sudden jump in Februarywhen Bitcoin was able to climb to $ 58,000 for the first time, the most violent price movement ever.
In retrospect, the analysts see two main causes for the crash. On the one hand, the hashrate of Bitcoin, i.e. the available computing power of the associated blockchain network, has collapsed suddenly in the last few hours and, on the other hand, unconfirmed rumors have emerged at the same time that the American supervisory authorities are planning a blow against several high-ranking “financial institutions”, who are said to have operated money laundering with cryptocurrencies.
It is estimated that the Hashrate Bitcoin has currently shrunk by almost half, which means a massive loss of computing power. The background to the sudden loss of capacity is very likely that large-scale power outages have occurred in the Chinese province of Xinjiang. The province is home to a large number of miners, China is the superpower in crypto mining anyway, which this failure alone shows.
True to the much-invoked mantra that “the course follows the hashrate”, the lights for BTC / USD then also went out.
“Price and hashrate have always shown a correlation”, as the crypto statistician Willy Woo in this context approved.
However, this “regularity” also has something positive, because the hashrate is now almost back to normal, which is slowly giving the price wings again.
Coin Metrics co-founder Nic Carter was similar at the start of the blackouts unimpressed, but he assumes that a discussion about the Chinese supremacy in mining could follow.
“If the power outages last 3 weeks, Bitcoin will experience the greatest difficulty adjustment ever, but I think that is unlikely. Either the power grid is brought back up and running or the miners are moving to another region, ”he said on Saturday.
The Bitcoin mining difficulty level is automatically adjusted at regular intervals and aligned with the available computing power so that the rate of increase in the amount in circulation remains as constant as possible. If the power failure lasts longer, the level of difficulty would have to be corrected downwards, since a large part of the mining power is missing. According to current Estimates However, there is no major downward correction imminent, which also confirms that the missing miners are slowly coming back online.
Don’t panic on the Titanic
The second trigger for the sudden Bitcoin downturn is again a single tweet that promises that the American authorities want to take action against institutional investors in the crypto industry.
US TREASURY TO CHARGE SEVERAL FINANCIAL INSTITUTIONS FOR MONEY LAUNDERING USING CRYPTOCURRENCIES -SOURCES
– FXHedge (@Fxhedgers) April 18, 2021
Almost exactly at the time of the break-in, the Twitter user spread FXHedge, citing “anonymous sources” a warning regarding an alleged pending lawsuit by the US regulatory authorities against “financial institutions” alleged to have laundered cryptocurrencies.
Although the tweet does not give any specific details, the message generated more than 5,000 likes and retweets in a short period of time, while Bitcoin went down almost at the same time.
As the media headlines the crash, crypto investors and experts stay as cool as ever.
“If you have been around long enough, then such a downturn in Bitcoin will leave you cold,” said the podcast host Steven Livera on his behalf writes. And further:
“Bitcoin just does its thing on the way to the exchange rate of 10 million US dollars.”
At press time, BTC / USD is almost back at $ 56,000, making up nearly half of its recent losses.
The German crypto expert Rafael Schultze-Kraft, co-founder and CTO of Glassnode, also sees the current situation no need to worrybut rather a cheap buying opportunity.
He points out that the “Spent Transaction Output Ratio” (SOPR), a key figure that shows the ratio of the actual profits and losses of Bitcoin investors, has been “reset” for the first time since the record high of 61,700 US dollars . So it will soon go up again.