The digital token has dropped about 13 per cent from its recent highs, following the political unrest in Kazakhstan, which is its second largest miner
The total market capitalisation of Bitcoin has breached $800 million levels with its trading volume shedding about 30 per cent in the last one dayNew Delhi: Bitcoin has been facing some tough times as the carnage in the crypto cart continues in the new year and the crypto market-cap slipped below the $2 trillion mark.
Not only this, the numero uno digital token has dropped about 13 per cent from its recent highs, following the political unrest in Kazakhstan, which is the second largest miner of Bitcoin.
The country’s low energy prices have attracted global entities to set up shop for Bitcoin mining. Electricity in Kazakhstan costs on average just $0.055 per kWh for businesses, compared to $0.12 per kWh paid by US businesses.
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The sharp rise in fuel prices led to a people’s protest forcing the presiding cabinet to step down, before the internet services were shut across the nations, and Bitcoin hash rate dropped by 13.4 per cent.
After China’s ban of Bitcoin mining in early 2021, the market took a big hit and some miners migrated to other nations such as Kazakhstan due to favorable factors such as abundant energy, said WazirX Trade Desk.
“Due to protests in Kazakhstan, the government shutdown the internet in the state, hitting the bitcoin miners hard and the hash rate dropped by 13.4 per cent, which was one of the factors responsible for the recent Bitcoin slump,” it adds.
This event has introduced the miners to political risk and is looking towards countries with political stability. Miners moved to Kazakhstan with old equipment and plan to move to other locations once the equipment becomes obsolete.
The total market capitalisation of Bitcoin has breached $800 million levels with its trading volume shedding about 30 per cent in the last one day.
Vikram Subburaj, Co-Founder and CEO of Giottus Cryptocurrency Exchange said that there was a general expectation of a strong Bitcoin price rally in Q4 CY2021 which didn’t eventuate.
“Bigger players in the market reacted to the disappointment by booking their profits and hence a sell-off ensured, which eroded a big chunk of crypto market-cap.” he added.
However, Kazakhstan is not the only pain point for the Bitcoin holders as the crypto behemoth has lost about 42 per cent of its value from its peak levels of $68,790 hit during late November 2021.
Further, there are more factors that are adding to the woes of the crypto tokens as the sharp dip cannot be attributed to only one particular factor.
Edul Patel, CEO and Co-founder of Mudrex said that political instability in Kazakhstan is definitely one of the points adding to the fall in Bitcoins as the state has been the world’s second-largest center for bitcoin mining after the US.
“The other reasons would be aggressive Federal Reserve’s policy, inflation, fear of regulations, uncertainty over the new Covid-variant, and major scam in Pakistan,” is hurting the crypto sentiments he added..
Bitcoin is an asset that trades as a proxy for liquidity conditions. As liquidity diminishes, macro players now in the fray sell bitcoin, and all of the other crypto follows the suite.
Bitcoin may end up falling to as low as $30,000 if the US inflation data to be released on Wednesday comes any higher than forecasted, warns Alex Krüger, founder of Aike Capital, a US based asset management firm, said in a Tweet.
Bitcoin dominance in the crypto cart has breached the 40 per cent, which gives the bears the upper hand. The low net transaction volumes also aided to the weakness in the crypto.
Investors are worried about an impending increase in interest rates given high inflation in the economy. Naturally, they are moving their investments to safer and less-volatile assets, Subburaj from Giotuss added.
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