Fears of US treasury rumors and a brief hash rate crash from a Chinese power blackout are the potential causes for Bitcoin drop.
Bitcoin (BTC) price fell to sudden lows of $52,000 on April 18 in a timely reminder of how price action often follows hash rate.
China, US rumors lead the BTC sell-off
Having lost $60,000 support level earlier in the weekend, BTC/USD was still fairly stable before the snap price event, which liquidated positions worth almost $10 billion over the past 24 hours.
At around $7,000, the hourly loss challenges the record reversal seen in February after Bitcoin hit $58,000 for the first time.
Analysts pointed to two events as potential causes for Bitcoin crash: a hash rate crash and rumors from unnamed sources that US regulators were about to charge unnamed “financial institutions” with crypto-related money laundering.
Hash rate — an estimate of the computing power dedicated to the network by miners — crashed by almost half. This was due to a mass outage in China’s Xinjiang province, having a massive number of miners, which began two days ago.
In a classic depiction of the old adage, “price follows hash rate,” BTC/USD then caught up with reality.
“Price and hash rate has always been correlated,” statistician Willy Woo argued, pointing to a similar event from November 2017.
Woo said that as then, the impact on price action was temporary and that hash rate had meanwhile already “almost fully recovered.”
Coin Metrics co-founder Nic Carter was similarly unfazed as the Xinjiang problems started, but predicted that media interest in the event would be huge.
“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,” he said as part of a social media discussion on Saturday.
Bitcoin’s difficulty declines when miners exit the network, but according to the latest forecasts, its next adjustment will only see a modest 1.8% decline.
US treasury rumors did not lead to panic among holders
Meanwhile, a rumor allegedly roiling Bitcoin sentiment seemed to be a single tweet about US legal action.
Surfacing right at the time of the price crash, Twitter account FXHedge quoted anonymous “sources” as warning over regulators taking unnamed “financial institutions” to court over money laundering related to cryptocurrency.
No other details were shared, but the tweet swiftly gained over 5K likes and almost as many retweets, with the $52,000 nosedive then ensuing.
While mainstream media seized on the action, seasoned Bitcoiners were as calm as ever about what was just business as usual in a bull run.
“Honestly, after you’ve been in the game long enough, you go numb to Bitcoin price dips,” podcast host Steven Livera tweeted.
“Just Bitcoin doing its thing on the way to $10M+.”
At the time of writing, BTC/USD had recovered about half of its losses to trade above $55,000.
Rafael Schultze-Kraft, co-founder and CTO of on-chain monitoring resource Glassnode, cited a classic on-chain metric as proof that now was a perfect time to buy BTC.
The spent transaction output ratio (SOPR), which measures overall profit and loss, had “reset” for the first time since after March’s ATHs of $61,700.