Bitcoin (BTC) continues to experience lower and lower levels – the rate of the first cryptocurrency fell to $38,295, which is the level of a 6-month low. There could be several reasons for this behavior, including possible repressive actions of the Russian authorities, the reaction to stock markets and the complication of mining.
According to the cryptocurrency exchange, the value of BTC fell rapidly on the night of January 21. During the day, the asset fell by 8%, and its market capitalization fell to $736 billion.
Bitcoin fell below $40 thousand for the second time during the month (on January 10, the rate of $39.7 thousand was fixed), but it is the absolute minimum for more than six months. The last time the value of the first cryptocurrency dropped that much was on August 5, 2021.
It should be noted that the downward trend of the asset is observed after it updated its historical high of $69 thousand on November 10. Since then, the rate has fallen by 46%.
Data from analytical company Arcane Research also says bitcoin trading volumes have fallen to their lowest since July 2021. The indicator grows the most during the U.S. stock market – these hours account for 43% of the daily trading volume of Bitcoin (BTC).
Traditionally, altcoins followed the first cryptocurrency downward. Particularly, Dogecoin fell by 6.4% (to $0.14901), Ethereum – by 9% ($2.8K), Binance Coin – by 10% ($425). Against this background, the total capitalization of the crypto market fell to $1.9 trillion.
Why is bitcoin getting cheaper?
There are several reasons for this reaction of the cryptocurrency market. On January 20, the difficulty of mining BTC increased almost commensurate with the fall in the rate – by 9.32%. The figure is tied to the hash rate (the total processing power of all miners in the network) and is recalculated every 2016 blocks, or about once every two weeks.
This is the second recalculation since the beginning of the year, but on Jan. 8 the complexity only increased by 0.41%. The new increase was the largest since August 2021.
Since then, mining complexity has risen steadily except in November, when the figure dropped due to China’s cryptocurrency ban. This collapsed Bitcoin’s hash rate by more than 50%, but over time it recovered and reached new heights of 217 exhashes per second (EH/s).
Another reason for the collapse was the decline in stock indices. Specifically, the S&P 500 has fallen for the third week in a row, and on January 20 it declined another 1.1%, to 4,482.73 points. Arcane Research calls the correlation between bitcoin and the index a record since October 2020.
The latest reason is the possibility of a ban on cryptocurrency activity in Russia. The Russian Central Bank proposed to introduce penalties for mining, its organization, sale and exchange of cryptocurrency. This could provoke panic among traders in this country – one of the largest single transactions involved the withdrawal of 83,826,621 Tether coins (more than 2.37 billion hryvnias).
Despite such trends, some experts remain optimistic. For example, Swiss bank Seba is confident that in 2022, the value of BTC may grow to $75 thousand.