Bitcoin, the world’s largest cryptocurrency, fell 14% to $ 51,541 on Sunday, wiping out most of the big gains made over the past week.
Bitcoin was last down 10% to $ 53,991 at 1:20 p.m. GMT, a whopping $ 12,000 below record highs set on Wednesday. Smaller rival Ether, the coin linked to the Ethereum blockchain network, fell 10% to $ 2,101.
Data website CoinMarketCap cited a power outage in China’s Xinjiang region, which is believed to power many bitcoin mines, for sale.
Luke Sully, CEO of digital asset treasury specialist Ledgermatic, said in an email that people “may have sold the news of the power outage in China and not the impact it actually had. on the network “.
“The power failure reveals a fundamental weakness; that although the Bitcoin network is decentralized, its mining is not,” Sully added.
Some widely followed blockchain analysts on Twitter pointed to a sharp drop in the “hash rate” due to the outage.
The hash rate refers to the volatility index which measures the processing capacity of the entire Bitcoin network and determines the power required by miners to produce new Bitcoins.
“Typically, hash rate shocks do not cause the price to drop. A reduction in the hash rate slows down transactions, which ironically makes it more difficult to move coins to exchanges for sale. price is well within typical volatility, it’s not noise, ”said Edan Yago, co-founder of Bitcoin-based decentralized funding protocol Sovryn.
Bitcoin’s pullback also comes after Turkey’s central bank banned the use of cryptocurrencies for purchases on Friday.
Edward Moya, senior market analyst at OANDA, said cryptocurrencies were ripe for a pullback.
“The market has become too aggressive and bullish on everything,” said Edward Moya. “It could have been any bearish stock that could have sparked that reaction.”
Many cryptocurrency markets operate 24/7, paving the way for price fluctuations at unpredictable times. Historically, retail and day traders have led the moves.
Despite the sudden sell-off, bitcoin is still up 89% so far in 2021, due to its widespread acceptance as an investment and a means of payment, accompanied by the influx of retail cash into stocks, exchange traded funds and other risky assets.
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