Bitcoin has experienced a brutal week after the Bitcoin Cash hard fork. Bitcoin started to fall from $6,000 level only to be followed by succeeding losses going all the way below $4,300. And yesterday, Bitcoin crashed below $3,500. It was the lowest level since September 2017. Just when some crypto experts such as Mike Novogratz thought that Bitcoin was stable at around $6,200 to $6,500, the recent drop happened.
The good news is that bitcoin was able to recover by 5.54 percent reaching $3,982.80. However, Bitcoin is still down by more than 80% since it was able to reach near $20,000 in mid-December 2017. As for XRP and Ether, both are down by 90% from its all-time high.
Ripple has been able to minimize the losses in the past week mainly because of the partnership that it has established together with the other institutions. Ripple has partnered with the likes of Santander and has been rumored to be partnering with Bank of America. It has also partnered with Western Union in the past. The reason behind the growing number of partners is the xRapid. The xRapid is said to be the one that will solve the high fees that are associated with cross-border transactions.
Decreased Hash Rate
One of the reasons for the drop in Bitcoin price is the fact that it Bitcoin’s “hash rate” was falling. Remember that the reason why Tom Lee decided to decrease his year-end Bitcoin price forecast from $25K to $15K is all due to Bitcoin’s hash rate. Why exactly is this important? Basically, it is the rate which miners solve the algorithm. According to Charles Hayter who is the chief executive of CryptoCompare, it is crucial simply because “Bitcoin has been correlated to its hash rate with it now falling, so is the price”. He also added that “the idea is that the hash rate gives some idea of what underlying opex (operating expenses) and capital costs people are willing to utilize to generate Bitcoin and give it a benchmark price”.
Bitcoin price has also been affected since power has been diverted after the Bitcoin cash hard fork occurred. There were reports of people who stopped mining Bitcoin after the price dropped. In fact, there were some mining rigs that are no longer profitable in the current state of Bitcoin. There were also reports wherein some mining rigs are being sold as scrap by the weight.
Aside from the hash rate, there is also the added scrutiny in the industry today. The US Securities and Exchange Commission this year has been active in keeping up with the crypto industry. Earlier this year, it considered Bitcoin and Ethereum as commodities. However, it pointed out that most ICOs may fall under securities. Just recently, for the first time, two ICOs were scrutinized and were made to pay the fine.
These are some events that may have stopped Bitcoin from going all the way up to $4,000. Is this a short-term trend or can we expect more losses in the coming months? When are miners going to decide to mine Bitcoin once again?