A ‘seismic mining shift’ may be driving Bitcoin price below $30K: Report
Bitcoin is experiencing a ‘seismic mining shift’, with a new and potentially much bigger pool of miners coming online, according to a weekly report. The report, from Coinbase, a cryptocurrency wallet and exchange, said that mining hardware was now being sold for as little as $1,000, and explained that this could be driving the price of bitcoin to below $30,000.
Bitcoin has been struggling, and even Bitcoin Cash has been hovering around the $3K mark for a while now. Although many believe that the slow decline is just the beginning, and that Bitcoin may bounce back in the near future, there are some that believe there is no way back for both. One of these experts is Max Keiser, a veteran trader who has been involved in the Bitcoin space since its inception. Speaking to Fox Business News, Keiser claimed that the price is likely to crash below $3K before it can recover, since the Bitcoin mining industry is facing an ‘irrevocable shift’.
Bitcoin is a decentralized cryptocurrency, meaning that is was not created by a government but by a community of developers and miners. Many people believe that this may mean its price will go up and down more than currencies backed by governments, such as the US dollar. One of the more popular theories is that Bitcoin is in a “bear market” as miners sell off their coins in anticipation of a rebound, although that is not strictly true since the supply of coins is capped at 21 million.. Read more about why did bitcoin spike and let us know what you think.
Bitcoin (BTC) fell 7.38% Tuesday to a five-month low at $29,313 as the market faces the prospect of another sell-off, this time led by miners affected by the recent crackdown on cryptocurrency organizations in China.
Bitcoin drops below $30,000 for the first time since January 2021. Source: TradingView.com.
The People’s Bank of China said Monday that it has asked several regional institutions, including Agricultural Bank of China, China Construction Bank and ICBC, as well as Jack Ma’s payment platform Alipay, to strictly enforce its recent decisions to ban bitcoin and other cryptocurrency-related activities, including mining.
Sichuan, a water-rich region in southwest China, has ordered the 26 largest cryptocurrency mining companies to cease operations, Chinese media reported Friday. The province provided 75% of the total global hash capacity to run the Bitcoin blockchain network.
The warnings from regulators follow a plunge in the bitcoin market, which was trading near $65,000 in mid-April thanks to the support of high-profile supporters, including Tesla CEO Elon Musk.
Mining Capitation FUD
A report published by Glassnode shows that China is experiencing seismic changes in its mining industry. The data analysis platform noted that many miners were ceasing operations or moving their hashing capacity outside China to comply with the mining ban.
It appears that one of the largest bitcoin hash capacity migrations in history is underway, writes Glassnode, adding that the estimated average hash speed (7DMA) has dropped from around 155 EH/s to around 125 EH/s in just two weeks after the Chinese FUD (fear, uncertainty and doubt turnaround).
The average hash rate of bitcoin fell 16% in the two weeks following the Chinese crisis. Source: Glassnode
Glassnode speculated that Chinese miners are likely to liquidate some of their bitcoin holdings if they make the decision to move their operations overseas or sell the equipment. These sales may result from mining companies hedging risks and raising capital to facilitate and finance logistics.
In the meantime, some miners may withdraw from the sector altogether, the report said.
Recent trends on the blockchain show an increase in distribution of BTC by miners and a decrease in accumulation.
For example, a measure of the change in miners’ net position that tracks the transaction flow of bitcoin mining pools showed that miners were distributing BTC at a rate of 4K to 5K per month during a period when the hashrate fell by 16%.
In the past two weeks, miners have sold more bitcoins than they owned. Source: Glassnode
This reversed the trend of net accumulation observed since April.
Large investors absorb off-market sales by mining companies
The capitulation of mining companies is not necessarily a bad thing, as long as the market absorbs the selling pressure. In the first quarter of 2021, the BTC/USD exchange rate rose from $28,700 to $61,788, even as miners sold off their bitcoin holdings en masse.
Jonathan Owadia, chief executive of OVEX, the South African crypto-currency exchange, blamed institutional investors for cushioning the recent sell-off, citing MicroStrategy’s continued rise in bitcoin accumulation as evidence. He said:
The continued accumulation of bitcoin by institutional investors, including MicroStrategy, is based on a very deep belief in a possible future rate hike after the current correction.
At the same time, a look at the OTC desks used by mining companies to match their large volume allocations with institutional buyers shows that there is demand from large volume buyers here too.
According to Glassnode, there was a net inflow of 3.0k to 3.5k during the May sale and the last two weeks. BTC. In both cases, however, almost all of the inflow was absorbed by buyers within a few weeks.
The miners ofpropose to deliver 3k. BTC on OTC platforms found buyers within two weeks. Source: Glassnode
As a result, bitcoin balances in OTC accounts have remained relatively unchanged since April.
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