Bitcoin’s trading activity decreases due to power outage in China

Bitcoin (BTC) encountered a slump last April 18, 2021, its weakest week since February of the same year according to news site CoinDesk. The sudden power outage in China’s Xinjiang region where a large portion of the world’s Bitcoin mining is done is the possible cause of this slump based on the reports from crypto assets tracking website CoinMarketCap. BTC veered towards a downward slope of 14% or $51,541 from its price peak of $64,000 in the previous week.

BTC’s trading activity decreased to 14%, a low trading activity rate since last February while Ether (ETH) also declined by 10% or $2,101. News about the blackout in the Xinjiang region of China prompted many miners to sell their assets for a low price as found by Reuters.

CEO of digital treasury management platform Ledgermatic, Luke Sully said in an email to Reuters that people most likely sold their Bitcoin because of the power outage in China. He further commented that this event shows the ‘fundamental weakness’ of the Bitcoin network that relies on centralized factors such as electricity.

Blockchain analyst Charles Edwards revealed on Twitter on April 18 that the Bitcoiin hash rate dropped 40% due to the power outage in China. It slowed down transactions which ‘[made] it harder to move coins to exchanges for sale’. He added that the price drop of Bitcoin is still within ‘the bounds of typical volatility’ and that it is not a signal for distress.

Turkey’s central bank prohibited the use of cryptocurrencies for purchases, causing another sink to Bitcoin trading activity. However, senior market analyst at currency trading company OANDA, Edward Moya pointed out that the market is becoming ‘overly aggressive’ and that any ‘bearish headline’ can spark a reaction to a cryptocurrency market such as Bitcoin. It is expected that there are many price changes and unpredictable movements in Bitcoin since the crypto market does not stop unlike traditional markets.

Bitcoin is still up in an 89% range despite its sudden selloff due to its use as an investment product and mode of payment. Moreover, it continues to remain high as more people are buying stocks, exchange-traded funds and different risky assets.

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