- US Treasury Department may reportedly accuse several financial institutions for money laundering using cryptocurrencies
- Power outage in China may have triggered Bitcoin selloff
The past week started on a positive note with Bitcoin reaching its all-time high price on Wednesday after Coinbase IPO. However, moods deteriorated on Friday after the Central Bank of Turkey banned use of cryptocurrencies payments for goods and services citing possible “irreparable” damage and transaction risks. All the crypto sphere basically fell accordingly, with top projects clearly suffering behind. The capitalization of all digital assets in circulation still remains above 2 trillion, while an average daily trading volume is registered at $231.2 billion. Bitcoin's market dominance decreased to 51.2%.
Total market capitalization still remains at high levels. Source: CoinMarketCap
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Open real account TRY DEMO Download mobile app Download mobile appBitcoin plunged over 20 % just days after hitting record high
According to some analysts, the recent sell-off was most likely caused by two factors. From one hand, some rumors appeared that the US treasury may charge several financial institutions for money laundering using cryptocurrency.
On the other hand, some traders believe that energy shortages in the Chinese province of Xinjiang, which is one of the prominent regions for Bitcoin mining, are responsible for the recent declines. Severe power cut was caused by a coal mine explosion and led to an immediate 30% drop in hash rate, according to Dovey Wan, founding partner at Primitive Crypto. The provinces of Xinjiang and Sichuan together account for over 50% of the total Bitcoin hashrate.
One of the top analysts Willy Woo pointed to the fact that Bitcoin price and hash rate have always been correlated. Woo also looked at the latest hash rate data on a 6-hour moving average and suggested it has almost been fully recovered and Bitcoin partially managed to erase recent losses.
Bitcoin hashrate 6h MA. Source: Glassnode
Woo also suggested that the Bitcoin sell-off was also due to the anticipation of miners going offline in China, which triggered the liquidation of short-term speculator positions. 9,000 Bitcoin were sent to Binance, which Woo pointed out as a sell-off from those who had better access to information regarding the events that took place in China.
Bitcoin net transfer volume from Binance. Source: Glassnode
The steep plunge has resulted in $1.72 billion worth of long positions liquidated in 1 hour on Sunday alone. Expanding this range to 24-hours shows that 927,000 traders’ positions worth nearly $10 billion were wiped off. Meanwhile, Larry Cermak, the director of research at The Block, believes that this is a natural correction after a massive rally, especially that during the weekends liquidity is low. Bitcoin price rally was fueled by positive sentiment around the Coinbase direct listing last week. Cermak added: "The best advice in this market is to stop looking for reasons and always be ready for large 20% down moves that have always happened."
Bitcoin fell more than 20% from its recent all-time high at $64,680 during the weekend, however buyers managed to halt declines at $50,900 support which is also marked with the lower limit of the 1:1 structure. If buyers manage to break above 50 SMA (green line) and lower limit of the ascending channel, then another upward impulse towards all-time high could be launched. On the other hand, if sellers will manage to regain control and break below the aforementioned support, then downward move may be extended to the $41,856 level. Source: xStation5
