(Reuters) – Bitcoin, the world’s largest cryptocurrency, fell 14% on Sunday to $ 51,541, reversing most of the big gains it has made in the past week.
Bitcoin last traded at 13% at $ 53,991 from 1320 GMT, a whopping $ 12,000 below record highs set on Wednesday. Smaller competitor Ether, the coin linked to the ethereum blockchain network, fell 10% to $ 2,101.
The data website CoinMarketCap has cited an eclipse here in the Xinjiang region of China, which allegedly drives a lot of bitcoin mining, for sale.
Luke Sully, chief executive of digital asset specialist Ledgermatic, said in an email that people “may have been selling about the news about the power outage in China and not the impact it had on the network”.
“The power outage exposes a fundamental weakness; that although the Bitcoin network is decentralized, its exploitation is not, “Sully added.
Some widely followed blockchain analysts on Twitter have pointed to a sharp drop in hash rate as a result of the outage.
Hash rate refers to the volatility index that measures the processing capacity of the entire Bitcoin network, and it determines the power that miners need to produce new Bitcoins.
“Shocks at the hash rate usually do not cause price drops. A reduction in the hash rate slows down transactions, making it ironically more difficult to sell coins to wallets. The recent price drop is well within the bounds of typical volatility, it’s not a signal, ‘said Edan Yago, co-founder of the Bitcoin-based decentralized financing protocol Sovryn.
The decline in Bitcoin also comes after Turkey’s central bank on Friday banned the use of cryptocurrencies for purchases.
Edward Moya, senior market analyst at OANDA, said cryptocurrencies were ripe for a setback.
“The market has become aggressive and bullish about everything,” Edward Moya said. “It could have been any clumsy headline that could have caused this reaction.”
Many cryptocurrencies markets operate 24 hours a day, offering the price of volatility at unpredictable hours. Historically, retail and day retailers have taken the step.
Despite the sudden sell-off, bitcoin has risen 89% so far in 2021, driven by its acceptance as an investment and means of payment, coupled with the rush of retail cash in stocks, exchange traded funds and other risky assets.
Reporting by Radhika Anilkumar in Bengaluru and Thyagaraju Adinarayan in London; additional reporting by Ira Iosebashvili in New York; Edited by David Clarke and Emelia Sithole-Matarise