Bitcoin Plunges to $50,528 as Mining Hash Rate Dips by 50%
Bitcoin (BTC) plunged to $50,528 on April 18, once again demonstrating the manner correlation between price action and hash rate. Data provided by CoinGecko.com indicates that Bitcoin faced a tough hour, with the price plunging from $59,000 to $50,528 in a matter of few minutes.
After losing psychological support of $60,000 earlier this week, BTC/USD tried to consolidate once again, but the selling pressure was too high that $10 billion worth long positions were diluted in a matter of few minutes.
Analysts provided two reasons for the crash: sharp decline in hash rate and rumors of case to be filed by the US regulators on financial institutions for cryptocurrency linked money laundering. Hash rate, which reflects the aggregate computing power of miners, fell by nearly 50% as per certain forecasts. This was primarily due to a big outage in China’s Xinjiang province, which hosts several large miners, for the last two days.
In a clear demonstration of well-known phrase “price follows hash rate,” the Bitcoin-US dollar pair lost valuation. According to statistician Willy Woo, “Price and hash rate has always been correlated,” indicating a comparable event in November 2017.
Woo further stated that the effect of price action was not permanent and that hash rate had in the meantime had totally recovered. Nic Carter, co-founder of Coin Metrics, was not bothered when the Xinjiang issue started, but predicts that media concern in the issue would be considerable.
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
While taking part in a social media interaction, Woo opined:
“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.”
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. https://t.co/ln6bZ3nUI0
— nic carter (@nic__carter) April 17, 2021
Bitcoin’s difficulty drops when miners move out of the networks, but as per the recent forecasts, the subsequent modification will only result in a negligible 1.8% drop. In the meantime, another news report that has created a bearish mood in the crypto market is that of a single tweet about the legal action by the US.
U.S. TREASURY TO CHARGE SEVERAL FINANCIAL INSTITUTIONS FOR MONEY LAUNDERING USING CRYPTOCURRENCIES -SOURCES
— FXHedge (@Fxhedgers) April 18, 2021
The news emerged from a Twitter handle ‘FXHedge’, which has stated that regulators intend to take unnamed financial institutions to court over money laundering associated with cryptos. The Twitter account did not reveal the source for the news. However, the tweet quickly received more than 5,000 likes and nearly a similar number of retweets, with the price plunging to $52,000. Even though mainstream news outlets were quick to highlight the event, established Bitcoin traders did not bother much as they believe that it is quite normal in a bullish rally.
Notably, podcast host Steven Livera, tweeted “Honestly, after you’ve been in the game long enough, you go numb to Bitcoin price dips.”
Honestly, after you’ve been in the game long enough, you go numb to Bitcoin price dips.
Just Bitcoin doing its thing on the way to $10M+
— Stephan Livera (@stephanlivera) April 18, 2021
While writing the article, Bitcoin-US dollar had regained a portion of its losses to trade at $56,268, reflecting a loss of 9.7% in the last 24 hours. Rafael Schultze-Kraft, co-founder and CTO of on-chain data tracking firm Glassnode, pointed to a typical on-chain metric to endorse that it is best time to invest in the numero uno crypto. After Bitcoin hit a high of $61,700 in January, the spent transaction output ratio (SOPR), which reflects aggregate profit and loss, had “reset” for the first-time.
I guess I might BTFD. #Bitcoin
— Rafael Schultze-Kraft (@n3ocortex) April 18, 2021