Bitcoin is easier to mine right now than it has been at any point since January of 2020. The hashrate, or the difficulty to mine new coins, is currently at its lowest point in 18 months due to consistent regulatory pressure against major mining operations. In China’s Sichuan and Anhui provinces, some of the world’s biggest crypto mines were shut down by authorities as part of an ongoing crackdown against cryptocurrency.
This pressure has now pushed Bitcoin’s price under $30,000 per coin. As of the time of this writing, Bitcoin is trading at just under $30,000, with some experts now predicting it will hold at $27,000 with support from enthusiasts. Bitcoin had been holding above $30,000 for four weeks, only briefly dipping under that benchmark on June 22. The coin has been trading in the $30,000 to $40,000 range since May, after cooling off from an all-time high above $60,000 in April.
Bitcoin’s high-water mark back in April coincided with an extreme interest in online investments, including “meme stocks” and other popular ventures. The market across the board has been called “overpriced” by many establishment analysts, who say a loose financial policy from the Fed and the three stimulus checks from the government caused many amateurs to pour money into various investments.
Meme stocks like GameStop and AMC have been popular with a number of investors on social media, like Reddit’s WallStreetBets community. Meanwhile, cryptocurrencies like Bitcoin have been the investment of choice for tech-minded amateurs and exchanges alike. Bitcoin’s current price freefall has been partially blamed on the overpriced market observed by experts, though Bitcoin’s enthusiasts claim that the current situation is actually price manipulation.
Accusations of Manipulation
Many posts on the Bitcoin subreddit have accused authorities in countries like Malaysia, China, and Ukraine of unfairly singling out Bitcoin mining as a way to artificially manipulate the price of the cryptocurrency. Enthusiasts insist that Bitcoin and other currencies like it are critical for the creation of a global network of decentralized finance. However, this kind of network would challenge the financial dominance of central banking institutions.
However, authorities have contended that their opposition to cryptocurrency isn’t based on fear of its performance, but out of trepidation over its features. Those features, including extremely high power consumption and the potential to allow for illegal, anonymous transactions, have made crypto an easy target for some regulators.
In China, for instance, crypto mines have been blamed for energy shortfalls as the country tries to lessen its ecological impact. In the US, some lawmakers have accused cryptocurrency of allowing for essentially unregulated securities-style speculation. All of this is contributing to immense regulatory pressure that has pushed Bitcoin and other currencies into a bearish period.
Enthusiast Sentiment Drives the Price
Currently, the continued downtrend in the coin since April has led to a number of newcomers to the investment selling out at a loss. Many investors who bought in at the highs in April, assuming the coin would continue its upward trajectory, sold out as the coin approached $30,000, according to reporting from crypto tracking site Glassnode. Glassnode’s reporting finds that about one-third of all Bitcoin being held currently is being held at an unrealized loss.
Enthusiasts on Reddit insist that people holding these unrealized losses don’t actually lose money until they sell, and insist that the smart money will hold. “The bullish squeeze that started past bull markets has historically been triggered by [long-term holders] holding 65% (2x 2013), 75% (2017), and 80% (2020) of the circulating supply,” the Glassnode report concludes.
The price of Bitcoin is entirely speculative. It’s based only on the sentiment of investors and has no basis in the economy of an issuing country or the performance of a company. This means that it’s very hard to predict what will and won’t move the needle with Bitcoin.
Bitcoin Bulls Predict Long-Term Gains
Bulls who say Bitcoin will bounce back and even go above its all-time high say that this is a temporary pattern that is likely to persist through the Summer. However, they argue, the sky is the limit with Bitcoin, which many enthusiasts insist is the currency of the future. Some reporting indicates that the newly lowered hashrates in the network mean that more miners outside of China are experiencing profitable coin mining operations.
This could offset the sell pressure caused by China’s crackdown and looming regulatory action in other countries. However, the current market strongly favors existing investors, as those with older coins are going to see the highest gains. Investors who are buying in now are doing so at their own risk. It’s difficult to say for certain where Bitcoin can go for here, other than that the bear case is clear in the short term and the bull case only presents itself cleanly in a very long-term discussion.
In a month, Bitcoin will probably still be down. In a year, though, it’s almost impossible to say. There are simply too many moving parts to get an accurate picture, so investing now is as much a gamble as an educated guess.