For the oldest members of the crypto community, what happened this Sunday is nothing special. And it is that, sudden corrections in the price of Bitcoin have been frequent for many years. However, for newer cryptocurrency investors, a 14% collapse in prices like the one experienced this weekend can be truly spooky. So while what led to this drop is still being debated, at CryptoTrend we wonder if the hash rate led to the collapse of Bitcoin.
The rise of Bitcoin
The last few months have been the best in the history of the crypto market. Not because of the increase in the price of Bitcoin and other cryptocurrencies, which had already experienced spectacular rises in their price before. But because of the increase in interest in crypto assets in traditional financial markets. What has allowed the entry of millions of dollars to the crypto market of large investment firms.
This, of course, has also been reflected in the hash rate of the Bitcoin Blockchain. Which indicates the combined computing power of all miners currently operating on the cryptocurrency network. And therefore, it is a good example of the interest that exists in investors from all over the world in the crypto world. Well, an increase in this rate reflects an increase in investments in the mining of the main cryptoasset.
Therefore, it is normal that during the last year the hash rate has maintained high levels, corresponding to the increase in the interest of institutional investors in Bitcoin. And for that same reason, a collapse in the hash rate like the one experienced on April 15 and 16 raises great concerns in the market. Which, for some analysts, may have been the direct cause of the collapse in the price of Bitcoin.
Xinjiang and the hash rate
This drop in the hash rate, which went from 172.58 million TH / s to 154.29 million TH / s, had its origin in the Chinese region of Xinjiang. Well, in addition to being crucial for the production of cotton and solar panels, it is also home to a quarter of all the mining power in the world. So when there was a controlled blackout in the area to carry out safety inspections at a coal mine, the hash rate collapsed as a significant part of the world’s mining went out of service.
This, for crypto analyst Willy Woo, would have been the main cause behind the collapse of Bitcoin. Causing an initial drop in its price, which was later combined with the largest liquidation of leveraged positions in history of the cryptocurrency, to generate a deep drop in its price. Starting now to gradually recover its previous price at the same time as the hash rate recovers as well.
Of course, this theory is not accepted by everyone. Including analyst Adam Cochran, for whom Woo’s theory I would not have meaning, being belied by the historical evidence of previous falls in the hash rate and its relation to movements in price. Without there being a precedent for what happened early Sunday morning.