- Bitcoin faces yet another brutal correction as changing macroeconomic trends puts pressure on the crypto market.
- Bitcoin is down 40 percent from its all-time high hitting a new five-month low.
There’s yet another bloodbath on Satoshi Street eroding more than $200 billion worth of investors’ wealth in a few hours. The world’s largest cryptocurrency Bitcoin (BTC) has tanked more than 8 percent today sinking under $39,000 levels and hitting a new five-month low.
— Santiment (@santimentfeed) January 21, 2022
Many analysts believe that the prevailing macroeconomic conditions have a part to play in the recent market correction. Wall Street has already turned dovish on the fact the Fed will quickly raise interest rates in 2022 owing to high inflation. As a result, volatile asset classes like equities and crypto have come under severe correction.
In a note to clients, Fundstrat Digital Asset Research strategists Sean Farrell and Will McEvoy wrote: “Bitcoin and the broader crypto market remain subject to the whims of macro variables”. The two also suggest that legacy buyers might be responsible for much of the recent price crash.
The extreme volatility in Bitcoin has been the very nature of the asset class! Investors have witnessed such 40 percent price dips many times in the past. However, with the recent price crash, Bitcoin has lost its crucial support of $40,000. Bitcoin critic Peter Schiff notes that one cannot rule out any further drop to $40,000, He added:
Bitcoin has finally broken the neckline of a head-and-shoulders top. The scary part for the longs is that the pattern projects a move below $30,000. Once that level is breached Bitcoin will have completed a massive double top. From there a crash below $10,000 is highly likely.
Bitcoin mining difficulty hit new all-time high
Despite the steep correction in the Bitcoin price, the Bitcoin mining activity has been going strong. In the last 24-hours, the Bitcoin network difficulty has surged by a strong 9.3 percent. This is the biggest difficult jump since last August.
The Bitcoin mining network difficulty adjusts roughly on a two-week schedule or every 2016 blocks. These difficulty changes maintain an average block time of ten minutes as the hashrate fluctuates.
The bitcoin mining difficulty and hashrate tanked more than 50 percent last year in May post-China’s bitcoin mining ban. However, the entire crash has been recovered over the last six months. This happened as a large number of Bitcoin miners successfully migrated to the United States and other regions of the world. Post the China ban, the U.S. has become the largest Bitcoin mining center.
Post the China ban, the Bitcoin mining industry has also seen a major transition to the use of green energy and renewables. Besides, big mining companies have been aggressively buying new equipment to increase their market share in the Bitcoin mining space.