Bitcoin, the largest cryptocurrency in the world, fell 14% to $ 51,541 on Sunday, 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 cites an eclipse in the Xinjiang region of China, which allegedly drives a lot of bitcoin mining, for sale.
Luke Sully, CEO of digital asset treasury specialist Ledgermatic, said in an email that people “may have sold on the news of the power outage in China and not the impact it had on the network” .
“The power outage reveals a fundamental weakness; 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 do not usually cause price declines. A reduction in the hash rate delays transactions, which ironically makes it harder to move coins to wallets. The recent fall in prices is well within the bounds of typical volatility., “says 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.
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