ECONOMY Bitcoin lost over $25,000 in value in two months
Why the price of Bitcoin has collapsed in recent days — Geeko
For the first time since October, Bitcoin briefly rose again. below the 40,000 dollar mark on January 10th. The cryptocurrency had reached a new all-time high when it passed the $69,000 mark on November 10. There are several reasons for this decline.
A “”correction” natural
Why Bitcoin Price Collapsed in recent days – Geeko
After a period of growth of several weeks, cryptocurrencies generally undergo what is known in the jargon as a “correction”. They reach a peak, a fixed price. by many traders to which many investors chose to set a sell order to take their profit. As the amount of sales exceeds that of purchases, the price retracts and falls by several percent in a few days, dragging with it the prices of all other cryptocurrencies. It then stabilizes naturally when demand meets supply, before resuming its flight. Once the $69,000 mark was reached, Bitcoin suffered one of these corrections. Logically, its price should have been leveling off around $55,000, but continued to rise.
The Importance of Patterns
Most traders rely on trading templates to encode their buy and sell orders. In the world of cryptocurrencies, these models tend to be less often respected than on the stock market. Volatility is more important and above all, cryptocurrencies tend to react more to the news. The permanent hunt for shorts and longs by “whales”, those investors who are capable of making the market tremble. by selling impressive amounts of Bitcoins, can also have the opposite effect on a given situation. And, in this case, what is emerging on the chart today is enough to scare any amateur trader. The “head and shoulders” – a model that represents a head surrounded by two shoulders, generally leads to a dizzying fall in prices. The schema is not yet complete, which means that it may very well be invalidated. If he came to complement each other and prices follow the logic of the pattern, Bitcoin could go back to low. $30,000. On social networks, there are many influencers. talk about. Psychosis leads to a mass effect. And quite naturally, the volumes fall. Low buying volumes also means higher volatility.
The unstable situation in Kazakhstan
Why Bitcoin Price Collapsed in recent days – Geeko Photo credit: AFP
Nearly 15% of Bitcoin miners are based in Kazakhstan today. Further to; the ban on cryptocurrency mining in China, many companies specializing in cryptocurrency mining have chosen to settle in Kazakhstan, a country close to China, where energy is usually very inexpensive, given the country’s natural resources.
Several tens of thousands of citizens took to the streets of the country to demonstrate against rising prices and the power in place. Facing the violence of some demonstrators, the government chose to respond with force by deploying soldiers and police in the streets and cutting off all communication networks in the country. With a direct impact on the mining industry. Information confirmed by the American media CNBC who spoke with a Kazakh miner, who explained that most miners in the country were disabled. A situation that resulted in an immediate drop in prices.
To better understand the situation, it is a question of explaining how Bitcoin works. Bitcoin mining is an indispensable process to the survival of cryptocurrency. The machines used in this process are assigned complex mathematical tasks that actually serve the purpose of the machine. to verify every transaction on the network. In the jargon, we measure the effectiveness of of this network with the “hash rate”. A high hash rate is synonymous with a healthy network. A fall in the rate can lead to instability. on the market. That’s what happened. last year when China banned mining on its territory. The ban has resulted in an immediate fall in the prices of Bitcoin and other cryptocurrencies. Of course, Kazakhstan only has 15% of the world's miners. But it’s enough to influence the market. and drive down prices… This is what explains the reaction of the price in recent days. The good news is that the market is generally very reactive. Many mining companies based in the West have already announced their intention to invest more in this technology to take advantage of the crisis. Because conversely, a lower hash rate means a bigger “reward” for miners, who are paid for each validated transaction.