Reported by Zhao Yi, Hu Jinhua, a reporter from China Times (www.chinatimes
Reported by Zhao Yi, Hu Jinhua, a reporter from China Times (www.chinatimes. net. cn) in Shanghai
On June 13th, Bitcoin fell again, breaking the $25000 barrier to $24986.3, a 24-hour decline of 7.2%. Ethereum's decline has been even greater, falling below $1300 per coin, with a 24-hour decline of 11.19%, reaching its lowest point since March 1, 2021. As of press release, the latest price of Bitcoin has rebounded to $25449.44, while the latest price of Ethereum is $1341.48.
According to CoinGecko data, on June 13th, the total market value of cryptocurrencies had shrunk to $107 million, with a 24-hour retreat of 7.6%. Since its peak of 2.8 trillion yuan in November 2021, the market value has lost more than half. Data shows that Bitcoin contracts have sold out $163 million and Ethereum contracts have sold out $143 million in the past 24 hours.
In response, Chen Jia, a researcher at the International Monetary Institute of Renmin University of China, told the China Times that Bitcoin has fallen to an 18-month low, mainly due to the aftermath of last Friday's US inflation data shock, which severely undermined investor confidence. Risk aversion has spread from the stock market to the US crypto asset market, and overall, liquidity is being withdrawn from all asset categories in the US.
The current economic recovery in the United States, with the US dollar in a high inflation range, is putting pressure on cryptocurrencies as a whole. This trend will continue for some time. The US dollar is currently in a channel of expected interest rate hikes, which existed until November. With the US dollar inflating beyond expectations, it may be affected by exceeding expectations, leading to tightening monetary policies. There is no 'flood' of funds in the market, and cryptocurrencies as a whole have become oversold The bearish sentiment has led to a sustained decline in prices Wang Juan, Secretary General of the Digital Economy Special Committee of the Beijing Computer Society, told reporters from China Times.
Cryptocurrency plummets again and again
In addition to high inflation, Chen Jia also believes that the macroeconomic performance of the United States, combined with the international political and economic landscape, will accelerate the accumulation of risks in the short term. Venture capital institutions will start reverse operations to balance global exposure to risky assets, while cryptocurrencies such as Bitcoin and the coin circle will unfortunately bear the brunt, and the short-term liquidity withdrawal from the coin circle is very astonishing. In addition, the recent trend of US monetary policy and regulation has been very unfavorable for the currency circle, with major asset liquidity fleeing, and the recent collapse of Luna's ecosystem and the suspension of withdrawal services by Celsius. The financial ecosystem of the entire currency circle is accelerating its collapse.
Another downside to the cryptocurrency industry recently is that data shows that an increasing number of people in the United States are entering the cryptocurrency industry with an average age of very young, many of whom are teenagers or even younger. They use social networks to promote and market cryptocurrency assets such as Bitcoin and other cryptocurrencies, which brings financial regulatory risks that scare rational investors and accelerate the process of short-term funds leaving the market, "said Chen Jia.
According to Coinglas' data, the total clearing amount of cryptocurrency long positions exceeded $100 million for the third consecutive day on June 12, compared to $258 million on June 19 and $290 million on June 11. In addition, the MVISCryptoCompare Digital Asset 100 Index, a market value weighted indicator that tracks the performance of the 100 largest tokens, has also fallen to its lowest level since January 2021.
Vijay Ayyar, Vice President of Enterprise Development and International for the cryptocurrency trading platform Luno, stated that bearish sentiment may continue into this week. If we look back at previous bear markets, Bitcoin typically drops by more than 80%, while counterfeit coins typically fall by more than 90%. If the situation continues, Bitcoin prices will be much lower in the next month or two.
Wang Peng, an associate professor at the Gaoli Research Institute of Renmin University of China, told reporters from the China Times that currently, cryptocurrencies have no limit on price fluctuations, no information disclosure, and lack of relevant regulation, presenting the attributes of financial derivatives. The recent monetary policy in the US market, the Russia-Ukraine conflict, and the downward pressure on the global economy all constitute the fundamentals of cryptocurrency fluctuations. In addition, due to the lack of standardization and management of trading mechanisms, there may be situations where traders make trades, causing continuous price fluctuations and profiting from them.
Large number of miners selling Bitcoin
The reporter learned that as the cryptocurrency market continues to slump, Bitcoin miners are starting to sell their hoarded tokens to compensate for the growing costs. According to F2pool data, as Bitcoin drops to around $25000, multiple mining machines, including the entire Ant S9 series, have reached the shutdown coin price based on the current mining difficulty and 0.4 yuan/kWh electricity bill.
Regarding this, Wang Juan stated that in fact, regarding miners' mining machines, the market calculates at a price of 4 cents. Based on the difficulty and complexity of mining, $25000 is a threshold. If Bitcoin falls below this price, mainstream models are at the critical point of shutdown. Therefore, for miners, a sustained and expected decline will have a more severe market impact than a sharp decline.
Recently, the flagship fund ARKInvest of Wall Street's "female version of Buffett" Cathie Wood released the first official version of the "Bitcoin Monthly Report". According to the ARK report analysis, miners on Bitcoin earned only $27.5 in May. However, electricity bills in the United States continue to rise. According to a recent report by CryptoMonday, for every $4 earned by Bitcoin miners, $3 is used to pay for electricity bills. According to the website, over 75% of Bitcoin miners use their income to pay for electricity bills.
On June 8th, Argo, a Bitcoin mining company, stated in a statement that the company produced 124 Bitcoins in May, a decrease of 25.3% compared to April, mainly due to the increased difficulty of the Bitcoin network. In addition, the high temperature in Texas in May led to an increase in electricity demand and electricity prices, which were also one of the reasons for the reduction in production.
The reporter learned that the high temperature in Texas, USA, led to a record level of electricity consumption in June, posing a challenge to the state's power grid and also affecting some Bitcoin mining businesses in Texas. It is reported that many Bitcoin miners in the state have reached an agreement with the Texas Electricity Reliability Commission (ERCOT) to cut off electricity during peak energy demand periods. In addition, Chilan County, Washington, USA has approved a 29% increase in the electricity bill for Bitcoin mining.
Matthew Schultz, executive chairman of cryptocurrency mining company CleanSpark, recently stated that a wave of small miners who entered the Bitcoin market during a bull market cycle and bet on Bitcoin price increases may now face the risk of clearing their Bitcoin mining operations.
CathedraBitcoin Inc., a small mining company, In order to maintain its mining business, it had to sell almost all of its tokens. On May 30th, Cathedra CEO AJScalia stated in a statement: "In the past few weeks, we have been restructuring our balance sheet and business to ensure that Cathedra can withstand long-term economic downturns
According to data released by CompassMining, miners transferred approximately 195663 Bitcoins to the exchange in May, the largest monthly increase since January. The average price of Bitcoin in May was approximately $32000, resulting in a total value of approximately $6.3 billion for tokens.
The impact of the decline in cryptocurrency prices on miners is obvious, "Chen Jia said, adding that in addition to electricity bills, there are also regulatory costs that are often overlooked. Recently, the US Congress is conducting a hearing on the legality of encrypted assets such as Bitcoin, and substantive legislation is expected to be introduced soon. Combined with the new regulations on encrypted asset regulation by the US SEC and FDIC in the early stage, the operating costs of miners in the US will continue to rise in the future; Considering that mining activities are illegal in China, Russia and other countries, the location of miners will become a problem in the future, because energy and heat dissipation also need to be taken into account. At the same time, the global energy crisis also has the possibility of deepening.
Chen Jiaqiang emphasized that cryptocurrencies are not a legitimate industry in China, Russia, and the United States. When the United States had the most relaxed regulation, cryptocurrencies were only regulated as a category of cryptoassets. China and Russia, on the other hand, make cryptocurrencies and mining illegal.
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