Bitcoin is almost half as valuable as it reached a record high of nearly $ 65,000 in April.
The cryptocurrency is now hovering above $ 35,000 after falling to its lowest level in five months a few weeks ago. Prices have now erased most of the gains made this year.
The main reason for this decline is due to Chinese stocks on the crypto.
“He has intimidated the market against the Chinese government over the cryptocurrency industry, which is why many traders are selling Bitcoin,” said Bobby Ong, co-founder of the cryptocurrency tracking site CoinGecko.
Mining operators in China have been forced to close and relocate their mining operations abroad. Given that China is the largest bitcoin miner in terms of hashing rates – a measure of hardware speed for crypto mining – this has led to Bitcoin also losing a large amount of scattering power, which has slowed down the mining process.
Despite this, experts and industry observers said the current stalemate facing Bitcoin would surely happen and that the demolition of mines in China would be good for the crypto community in the long run.
Bitcoin due to price correction, but not crypto winter
The price correction was to follow, as the mining processes for cryptocurrencies were already facing mass public scrutiny. Some companies like Tesla even had stopped their participation with the crypto to become.
Tesla’s Elon Musk was worried about the growing use of fossil fuels to exploit bitcoin and transactions, especially coal, which has the worst emissions of all fuels. Elon said that Tesla will again accept Bitcoin as a method of payment when crypto miners use clean energy.
Jason Deane, an analyst at Quantum Economics, said that while long-term Bitcoiners see this as an extremely positive move for the network because it could mean a cleaner energy future, short-term traders are afraid of price uncertainty.
Experts predict that Bitcoin is heading towards a period of overreaction that will correct itself in the foreseeable future.
They pointed out that Bitcoin is unlikely to go down to the lowest levels recorded in its last bear market in 2018, where crypto was traded at $ 3,000.
The lowest bitcoin it could fall on would range from $ 15,000 to $ 25,000, said Victor Zhang, CEO of Alphawallet.
This is because there is much more utility, adoption and diversification in the industry compared to three years ago.
The current bitcoin price of about $ 30,000 is strong price support, Bobby said.
But bitcoin prices have faced strong resistance to cross the $ 40,000 mark, and for prices to cross that, there must be enough momentum and renewed interest, he noted.
“Purchasing power has noticeably weakened. If the $ 30,000 support fails to hold, we could see BTC hit the next $ 25,000 support. There are also indicators that suggest that the price reversal is fine … For example, the formation of the previous reversal over the last few days has failed. ”
Blake Ho, director of technical services at Furucombo, added: “It is important to keep in mind that the crypto market is not rational and is easily affected by emotions, fear of missing out on great opportunities and fear of the latter escaping. So short-term price volatility is usually quite significant. “
“In order to sleep better while moving in the market, it is important to diversify our portfolio … (like) allocating some funds into stable loan yield coins or some in promising long-term investment projects are examples of portfolio diversification and reducing overall risk,” she suggests. .
Chinese demolition is good for the crypto community
Digital currencies are backed by a large network of computers around the world.
In the case of Bitcoin, these computers race to solve complex mathematical puzzles to get transactions going. This process also generates new Bitcoin, rewarding cryptocurrency miners if they are successful.
According to reports, it is estimated that more than 90 percent of China ‘s bitcoin mining capacity has been shut down. It is estimated that between 65 and 75 percent of all bitcoin mining in the world takes place in China.
In the last month or so, the Bitcoin hashrate has dropped from a record 180.7 million terahases per second in mid-May to about 116.2 million last week, according to Blockchain.com data.
Experts said that suppression is actually a good development for the crypto industry.
“There could be a sharp drop in mining power in the short term, but that will help make the Bitcoin network more resilient and decentralized. This will help alleviate one of the common criticisms from the past when most bitcoin spread rates resided in China, ”Bobby said.
Victor said the failure would only help improve the crypto industry and its fundamentals.
“Chinese mining has a negligible impact because very few countries ban mining. They also ban evidence of mining work. Proof of role-playing can be easily run on a built-in device and does not consume energy … People should focus on improving energy sources instead of interrupting use. “
Crypto experts add that, as the number of Bitcoin miners going offline due to Chinese restrictions increases, the share of other miners in the network will increase, which could make mining much more lucrative.
“While some countries ban mining, others are stepping up it. Some states in the United States, such as Texas and Florida, they welcome miners to migrate, ”Bobby said.
The future of Bitcoin
As for the outlook for Bitcoin – which still holds the title of the world’s largest cryptocurrency by estimate – Bobby thinks the bitcoin market is expected to remain turbulent for now.
“Currently, there is a lack of a clear catalyst for the Bitcoin market … The outlook for Bitcoin will also depend heavily on the macroeconomic environment, and Federal Reserve statements will play a big role in determining the next move.”
However, he noted that this is not the first time that China has tried to ban or limit the growth of Bitcoin and such setbacks occur at least once a year every year.
And this new stalemate will surely strengthen Bitcoin.
“It is impossible to completely ban Bitcoin. With each announcement of a ban, the network becomes more resilient and may soon mature to resist the impact of this kind of news, ”Bobby said.
Bitcoin also recently concluded its first major upgrade in four years, promising additional functionality, privacy and efficiency.
Bobby said it is very unlikely that another cryptocurrency will replace Bitcoin in the near future. “Bitcoin is still a global crypto reserve currency and is expected to remain so in the foreseeable future.”
Victor agreed that he added that Bitcoin is still the most accepted crypto motto, which can be seen countries and companies already adopting it for everyday use.
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Credits for prominent paintings: Dado Ruvić via Reuters