- 20th July 2021
- Posted by: Hakeem
- Category: Crypto
The flagship cryptocurrency, Bitcoin has broken below the $30,000 support zone to trade currently at $29,600 on the back of diminishing institutional demand for the crypto asset, a further drop in the mining hashing rate and negative adjustment of mining difficulty.
Why the decline?
The cryptocurrency market crash in May has led to a significant reduction in the interest from institutional investors, who now appear to be in risk management mode as BTC price struggles to climb higher. Evidence of the decline in interest can be found by looking at the market price of GBTC, which continues to trade at a -15.3% discount and by observing the net inflows to the Purpose ETF which has slowed down significantly. Data from Glassnode shows that the ETF saw a net outflow of -90.76 BTC, which is its largest outflow since mid-May.
Since China’s crackdown on cryptocurrencies and mining activities, Bitcoin’s hashrate has been on a downtrend. More than 54% of Bitcoin’s hashrate has dropped off the network since its market peak in May. Because of this, the Bitcoin code has been re-calibrated to make it 28% less difficult to mine. According to BTC.com, this means that it is getting easier to mine the crypto asset and it has led to the fourth consecutive negative adjustment in the Bitcoin mining difficulty by 4.8%, a figure which has fallen by almost half since mid-May when Bitcoin’s price crashed nearly 50%. Although this may mean more money for miners, it also indicates a security issue for the bitcoin blockchain and investors are reacting to it.
On-chain analytics suggest that there has been an increase in deposits of BTC to exchanges. This figure continues to rise with more than 28,700 BTC, the largest inflow in over a month and a half, taking place on July 16th. This is a bearish indicator as it is believed that when BTC is moved to exchanges, it indicates a possible sell-off.
The cryptocurrency market was not the only market that faced downward pressure on July 19 as a surge in Covid-19 cases led to a pullback in global financial markets. The S&P 500, DOW and NASDAQ all closed the day down 1.59%, 2.09% and 1.06% respectively. Out of the top 200 cryptocurrencies, the only two notable performances of the day were a 24% gain for Bitcoin Standard Hashrate Token (BTCST) and a 17% rally from Dash (DASH).
The overall cryptocurrency market capitalization now stands at $1.19 trillion and Bitcoin’s dominance rate is 46.7%. Bitcoin had earlier crashed below $30,000 in June, when the market reacted to news of Chinese government crackdown on cryptocurrency miners in Ya’an, one of the major crypto mining hubs in China’s Sichuan province.
Many analysts have predicted that Bitcoin would hit $25,000 before heading back on its bull run while others say it may fall further than this. Bitcoin crashing below $30,000 is not a good sign for other altcoins as they follow the trend of Bitcoin because of its market dominance.