Bitcoin Price Drops Below $8K for First Time Since June
The price of Bitcoin has been on a bearish run this week, and there are plenty of theories around why this may be the case. Some are saying it is just price following the hash rate after the rate suddenly dropped 40%, and others believe that Bakkt’s lackluster debut has reduced confidence in the bull market.
Bitcoin Hash Rate Flash Crashes
The most likely cause is the 40% crash in the hash rate of Bitcoin that occurred on September 23rd. This flash crash shocked the network and brought the rate down from 98,000,000 TH/S to 57,700,000 TH/s. A partial explanation for this is the Kyrgyzstan cut off power to 45 mining firms due to high consumption, and a Canadian-based mining firm is in the midst of upgrading their operations. This doesn’t seem like it should be enough to cause the 40% crash though.
Recently, Bitcoin mining has produced several new all-time high hash rates, which many read as a bullish signal for Bitcoin’s price. As a measure of the computing power being performed on the network each second, the hash rate represents the network strength in terms of security.
The flash crash in the hash rate did not remain, but it still hasn’t recovered to its record levels of 102 quintillion hashes per second. Future predictions for Bitcoin still remain bullish, but those who remember the beginning of the crypto winter of 2018 know that it began with a 50% drop in the hash rate in November 2017.
Bakkt Doesn’t Deliver
Another factor in the drop in Bitcoin’s price is that the Bakkt futures exchange opened with a pretty unimpressive debut. 71 BTC of volume on the first day is not a very encouraging number and showed much less interest in the product than the news cycle and hype demanded. As such, it is easy to think that this means that the market has overestimated interest in Bitcoin.
The Chicago Mercantile Exchange launched their Bitcoin futures product in December 2017, and a drop in the price followed shortly thereafter. This was explained by the idea that massive demand from institutional investors was expected for the futures, and when it didn’t materialize, the market realized that the crypto market wasn’t nearly as advanced as it had been previously thought to be.
Altcoins Follow Suit
Bitcoin wasn’t the only coin to crash though. Ethereum, which had previously been giving some very positive price signals, is now trading down below $170. Traders are looking for the beginning of an alt season, and though that the last two weeks of Ethereum’s price movements might have been the beginning, but with everything trading in the red this week, that might not be the case.
One theory behind the psychology of the supposed “alt season” is that those who bought Bitcoin at the June highs of $13K and then experienced a drop to the $10K mark are already down approximately 30%. They can either HODL or they can put that money into another coin in the hopes of buying before the spike. It is really just a diversification method, but it has manifested in the past, so traders would like to get ahead of it and profit.
The above is fairly inconclusive So even though many are calling it an unlikely coincidence that the Bakkt exchange would go live on the same day that the hash rate (and price of Bitcoin) would crash, that is what it seems like right now.