Bitcoin has partially recovered its losses after yesterday's 15% drop in about one hour. Other coins, such as ether, litecoin, and ripple, also declined in price. The euphoria from the initial public offering of shares on the stock market of the largest US exchange Coinbase Global Inc. led to a rise in the price of bitcoin in the region of 64,000, however, the enthusiasm quickly faded.
Why has Bitcoin fallen so sharply?
There is no exact answer, especially with volatile assets such as cryptocurrencies, where it is often unclear who is selling or buying. One of the reasons was the accident at a coal mine in Xinjiang, which led to a power outage at all the mines, which in turn led to a decrease in the hashrate of the Bitcoin network by about 22%. Infrastructure difficulties in China caused by a power outage at mining farms have led to a rapid increase in transaction fees on the bitcoin network. Now the daily figure is about $ 55 per transaction, and about 100,000 unconfirmed transactions are hanging in the mempool, even in the morning, there were about 200,000 of them.
However, it is not only the difficulties in China. They also pose a real threat to close long positions on bitcoin. The offering of Coinbase Global Inc. was also the starting point for profit-taking. Such historical events occur quite rarely, therefore, against the background of the constant terrorization of traders in recent years, the fall in the bitcoin rate after the IPO of Coinbase Global Inc - this is exactly what happened.
Another problem is regulatory concerns. As digital assets become increasingly popular with both retail and institutional investors, regulators around the world are showing increasing interest. Former SEC Chairman Harvey Pitt said in a recent interview that he expects "fair" regulation of cryptocurrencies by the US Securities and Exchange Commission (SEC).
Let me remind you that the SEC recently changed its chairman, who is known for his loyalty to the cryptocurrency market. According to Harvey Pitt, Gary Gensler is an expert on cryptocurrencies – as he has repeatedly talked about them. "I expected to see clear rules governing this area under his leadership," Harvey said. The new chairman, Gary Gensler, in an interview with Bloomberg, said that the topic of cryptocurrencies and the regulation of this area coincides with the goals of the SEC, and this issue is taken under close control by the regulator.
Today, it also became known that the UK Treasury and the Bank of England are considering the option of creating a digital currency of the Central Bank, joining the authorities of many other countries. If you quickly run through the list, there is no special breakthrough in this direction anywhere. Only in 2020, the Bahamas launched a digital currency called the "sand dollar", however, it is more of a "dollar" for a narrow circle of people. Brazil, which has long been working on digitizing its real, plans to launch it in 2022. Canadian authorities are still working on developing the infrastructure needed for the digital currency, however, there are no plans to launch it yet. As for the Middle Kingdom, China is preparing to launch a pilot digital yuan only in 2022, while Japan is only planning to work on a digital currency.
And now the United Kingdom has joined this list. On Monday, the government and the Central Bank announced the creation of a task force to coordinate the possibility of issuing digital money created by the Bank of England, which will be used by both businesses and households. According to the statement: "If approved, the digital currency will exist alongside cash and bank deposits, not replace them."
As for the technical picture of bitcoin, there is a real risk of a larger drawdown. However, as was the case throughout this year – each major drop was accompanied by new purchases from major players. Now, if you look at the daily chart, the breakout of the 50-day moving average can cause a serious blow to the quotes of the world's first cryptocurrency. A break and consolidation below the level of 56,000 will lead to increased pressure on BTC, which will quickly push it into the support area of 51,500, from which it has already successfully rebounded at the first fall. A break in this range will open a direct road to a minimum of 44,900. It will be possible to talk about the resumption of bitcoin growth only after the exchange rate stabilizes around 59,500, which will open the possibility of updating new local highs.
