Over the weekend, Bitcoin lost over $7,000 in a matter of minutes, pulling most of the top cryptocurrencies with it.
Recall that the leading cryptocurrency reclaimed the $60k mark and set a new all-time high just a few days ago. But while many analysts were predicting new highs, things took a different turn on Sunday. Bitcoin took a massive price action knock after an outage in the Bitcoin hash rate. Within an hour, the price of the digital asset lost over $7,000, eventually plunging to a low of around $52,000. Consequently, about $10 billion was liquidated on the trading day.
Several theories have tried to give reason to the recent crash. While some blame the hash rate crash caused by a major power outage in China, others are pointing to rumors of upcoming crypto regulations from the United States.
Speaking of the hash rate crash, a popular Bitcoin statistician Willy Woo asserts that Bitcoin’s price is directly proportional to its hash rate. As such, the downward price trajectory is a temporary one. Bitcoin would recover as soon as the hash rate bounces back.
Meanwhile, Nic Carter, co-founder of Coin Metrics shared similar sentiments, suggesting that the outage in China is responsible for the crash. He said:
If the outage lasts 3 weeks then bitcoin will have a historically large difficulty adjustment but I think that’s unlikely – either grid comes back online or miners will move their hardware… Based on data that comes in we could end up learning that Xinjiang is a smaller share of the network than we thought (cbeci is great but data is a year old now). My theory has been that HR is migrating out of China, would be great to see confirmation.