Bitcoin has been slipping from its all-time high back in April, due to continued pressure from regulators and investor uncertainty about the future of cryptocurrency. The currency has been holding strong around the $30,000 mark, though, stubbornly refusing to slip under that number for weeks. Analysts now believe that support for the currency is shaky enough that it could finally dip under $30,000, while enthusiasts online feel as though the current trends mean Bitcoin can only go up.
What’s Driving the Price Down?
The price of Bitcoin has taken a beating in the last month due to massive amounts of pressure from regulators around the world. Binance, a major Bitcoin exchange, was effectively banned from operating in the UK. Several provinces in China have officially clamped down on Bitcoin mining, blaming cryptocurrency for missed energy targets and power shortfalls.
In the US, Senator Elizabeth Warren joined a growing number of lawmakers calling for new protections on cryptocurrency to be passed into law. Warren’s argument is that cryptocurrency is too unstable of an investment to be left unregulated. As such, she’s calling for the SEC to essentially treat crypto as a security, which would make buying and selling the standard significantly more complicated in the US.
Crypto Drives Demand for Graphics Cards
All of this is coinciding with the logistics of actually mining the coins. In the past year, the combined pressures of manufacturing shutdowns and strained global supply lines have made it very difficult to acquire high-powered graphics cards. Since mining for cryptocurrency involves using a computer to solve very complicated math problems, miners prefer to use high-end graphics cards to make the endeavor slightly faster and more efficient.
Bitcoin’s all-time highs over the last six months have seen the demand for graphics cards soaring. While millions of people were stuck at home during the 2020 lockdowns, people looking to play video games found it extremely difficult to buy any new graphics cards. Much of the shortfall was blamed on intense interest from crypto miners who were accused of using automated scripts to purchase graphics cards as soon as listings for them were put on the internet.
After months of GPU shortages and frustration from customers who are uninterested in cryptocurrency, many gamers are actually happy to see Bitcoin falling. The hope among gaming enthusiasts is that a collapse in the value of Bitcoin will help alleviate the extreme demand for gaming components.
Cryptocurrency enthusiasts argue that while many amateur crypto miners may use gaming GPUs to harvest coins, mining hardware is actually much more specialized. The “real” mining rigs, like the ones recently shut down in Sichuan and Anhui provinces, are warehouse-sized server banks drawing considerable power and yielding massive returns in the number of coins mined.
These kinds of mining rigs are extremely profitable for their owners and are also extremely hated by some local governments. Sichuan and Anhui each cracked down on these types of mining facilities due to their massive power consumption. China’s government has blamed such mining facilities for missed energy targets, which the country has set to reduce its carbon footprint.
In Malaysia, the government made a public display of their disdain for mining hardware by crushing over 1,000 mining rigs with a steamroller. Malaysian authorities seized the crypto rigs earlier in 2021, accusing their owners of stealing electricity from the power company. The public use of a steamroller to obliterate the hardware made many enthusiasts online wince in secondhand pain, as the stunt destroyed hundreds of thousands of dollars worth of equipment.
Many commenters online noted that the Malaysian government could have easily sold the equipment for a tidy profit. A global semiconductor shortage has led to extremely constrained production for electronics around the world. Even if the government is taking a strong anti-crypto stance, simply destroying extremely valuable electronics comes across as wasteful and spiteful.
Can the Price Recover?
Users on the Bitcoin subreddit have pointed out that even as Bitcoin’s value is dipping, its number of concurrent users is at an all-time high. Enthusiasts argue that Bitcoin’s unique place in the world of global finance makes it extremely likely to either outright replace fiat currency or simply vanish under regulator pressure. This “all-or-nothing” mentality mirrors the attitude of amateur retail investors on subreddits like r/WallStreetBets, many of whom insist that meme stocks are destined to effectively hit zero, or go “to the moon”.
Crypto enthusiasts online continue to “inhale hopium,” their term for listening to positive news about the future of cryptocurrency. Even in spite of regulatory pressures, Bitcoin is holding just above $30,000 as of the time of this writing. The next few weeks will test the currency’s resilience, as continued challenges from regulators and extreme interest from amateur investors will continue to engage in a massive tug-of-war for the coin’s value.
Where can Bitcoin go from here? The sky is the limit, but the floor is just as likely.