The bitcoin rollercoaster is in full swing. Bitcoin nosedives reaching $33,400 on Sunday –nearly 20% below the $41,200 on the previous Tuesday– to later recover to jump above $35,400 in just hours, according to data from Coinmarketcap.
Bitcoin Nosedives From April Peak
Reuters reports that, despite gaining over 10% in the last year, bitcoin has dropped by over a fifth in the last six days, and plunged by half from its April peak of $65,000. After reaching its all-time high of $2.6 trillion the same month, the market value of all cryptocurrencies fell by almost half to close to $1.45 trillion.
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The hashrate –the measuring unit that explains the processing power of the bitcoin blockchain– is falling significantly in China as the government raids on the premises where the cryptocurrency is mined. This affects the price worldwide, given the number of network transactions that are certified in the country.
In fact, according to the University of Cambridge, China accounted for 65% of the world’s bitcoin mining in April 2020. Jonathan Cheesman, head of institutional and over-the-counter sales at crypto derivatives exchange FTX, told Bloomberg: “In the long term, most view the exit from China as positive, but in the short term it may lead to inventory sales.”
China’s Tough Stance
There are growing fears that China will continue its clamp-down on bitcoin mining amid concerns over energy use and deadly coal accidents. The city of Ya’an, in the southwestern region of Sichuan, promised provincial authorities that it would eliminate all bitcoin and ether mining operations within a year, as informed by Bloomberg.
According to a Global Times report, the local bans on mining farms will account for 90% of China’s total bitcoin mining capacity. Ben Sebley of London-based crypto firm BCB Group told Reuters, that a “crackdown on Chinese miners might mean that they are offloading coin into a thin market and taking us lower.”
Earlier in the week, Tesla’s Elon Musk denied having sold a significant part of the Bitcoin that his company had bought earlier this year, and said that he was willing to accept the cryptocurrency as a payment method for its electric cars in the future. This statement alone skyrocketed bitcoin to $41,000.
However, for Naeem Aslam, director of analysis of Avatrade, the intriguing side of the story is that more investors are investing in cryptoassets.
“All this occurs at a time when we hear many positive news from institutions, which continue to increase their operations to provide access to bitcoin to its customers. If we look at different surveys, it is becoming increasingly clear that more and more hedge fund managers are willing to allocate close to 10% of their portfolio in bitcoin and other digital assets and this is really positive for long-term digital assets,” he told The Wall Street Journal.