The Bitcoin price fell by about 18% over the weekend, and one of the factors behind this drop was a power outage in the Xinjiang region of China that caused a 45% drop in the hash rate.
The hash rate of Bitcoin measures the total combined computing power used to exploit and process the cryptocurrency.
Another factor behind the price plunge of Bitcoin was speculation that the US Treasury would shell out several financial institutions with money laundering for money laundering.
Ran Neuner, co-founder of Crypto Banter, host of Crypto Trader of CNBC and CEO of OnChain Capital, called the power outage “a bit narrow” because it highlighted a major risk for Bitcoin investors.
Neuner told Kitco editor-in-chief Michelle Makori ‘what happened over the weekend was a bit scary because there was a power outage in one province in China. We did not know about the power outage, but we did see that the hash rate of Bitcoin dropped by 45%. ”
Investors were concerned about whether Bitcoin was really as decentralized as one might initially believe, Neuner added.
‘What this means is that 45% of miners own computers, exploit Bitcoin or confirm transactions, 45% of which have fallen. “We have not seen a decline since 2017,” he said. ‘It sounded a few alarm bells. Why? Because if something is so truly decentralized, when 45% of the network is in one province in China, and we know that China had conflicting views on Bitcoin … what happened was there were people who started selling their Bitcoin because they started looking at Bitcoin and says, hold on, maybe this decentralized currency is not so decentralized after all. ”
This fear contributed to what Neuner described as’ the biggest liquidation in [Bitcoin’s] history. ”
The silver lining of this event is that as more Bitcoin investors become aware of the risks, there may be an attempt to further decentralize Bitcoin mining from China.
“We are pleased that this concern has finally got there, and we know, and there is now a challenge to get more mining done outside of China,” he said.
The power outage in Xinjiang coincided with a change of attitude towards Bitcoin from the Chinese government, as Beijing on Sunday called Bitcoin an “investment alternative”, after years of a government suppression of the crypto-currency.
“It’s a big turnaround indeed,” Neuner said. ‘To take a turn and actually start saying that Bitcoin is an alternative investment, and that other cryptocurrencies could also be considered, is a big turnaround and it could bring China back to the market, or specifically the speculation market, which is super exciting for the industry. ”
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