Bitcoin’s price plunges 10% before rebounding – market witnesses massive liquidations
$10 billion worth of cryptocurrency positions were liquidated in just sixty minutes.
- Bitcoin's value dip is being linked to a power outage that caused mining operations in Xinjiang to stop.
- BTC's hash rate has dipped by 50% since the blackout.
- The President of the Dallas Federal Reserve believes BTC has transformed into a store of value.
Following Coinabse's listing on Nasdaq, it seemed as though there would be no stopping Bitcoin, especially as the premier cryptocurrency scaled up to a fresh all-time high of US$64,000 (AUD$83,000) last week.
However, over the course of the last 48 hours, BTC's value has witnessed a massive decline, with the digital asset dipping to as low as US$53,375 (AUD$69,000) only to forge a recovery of sorts thereafter. At press time, Bitcoin is trading at US$56,760 (AUD$73,500).
The rest of the cryptocurrency market has also faced a lot of bearish pressure, with the total market capitalization of the digital currency market shrinking by a whopping $310 billion in less than a day.
Liquidations run amuck
During the flash crash, it is estimated that a total of $10+ billion worth of crypto long positions were liquidated by investors across the globe. A number of experts believe that the sudden losses are directly tied with the sharp 50% drop in Bitcoin's hash rate which also witnessed around the same time.
Hash rate is a metric that is often used to gauge the total processing power of a particular crypto network. In this regard, blackouts witnessed across Xinjiang, home to one of the world's largest bitcoin mining facilities, could be the reason why this drop happened.
Caused as a result of a coal mine explosion, the loss of power production in the region resulted in BTC's hash rate plummeting from its all-time high of around 215 exahash to just 120 exahash fairly rapidly. That said, Bitcoin is still up more than 700% since the start of the year.
Bitcoin continues to gain mainstream legitimacy despite volatility
Even though Bitcoin continues to be faced with a certain degree of volatility, an increasing number of traditional financial institutions have continued to showcase their support for the world's largest cryptocurrency. This time around, Robert Kaplan, President of the Dallas Federal Reserve, was quoted as saying that despite the challenges being faced by BTC in regard to its widespread adoption, the currency has "proven itself to be a store of value".
Disclosure: The author owns a range of cryptocurrencies at the time of writing