On 18 April 2021 Bitcoin experienced one of the greatest dips in its history, bringing much of the crypto market down with it. Nearly one million traders’ accounts were liquidated in about an hour due to the downward spike.
According to the data on CoinMarketCap, the total market capitalization of cryptocurrencies around the world went down by about $310 billion in less than 24 hours, shrinking the market from more than $2.2 trillion to less than $1.9 trillion.
Xinjiang Grid Blackouts to blame?
A coal mine explosion in Xinjiang on April 10, caused blackouts and took days to tank bitcoin’s hash rate. The hashrate plummeted from an all-time high above 215 exahash per second on Wednesday to about 120 exahash per second early Sunday.
Since April 15, the Bitcoin network hashrate has dropped more than 49% after touching an all-time high at 218 exahash per second. Regional reports noted that in China the Xinjiang grid is having blackouts and “safety inspections.”
Popular market analyst Willy Woo shares that the Bitcoin hashrate and its price have always been correlated. And thus, following the blackout in Xinjiang, yesterday’s price action followed the collapse in the BTC hashrate.
China Mining Dominance
Following these events, some have even questioned if there isn’t an over-reliance on mining efforts from China. Since about 50% of the hashrate comes from China, if something more serious had to happen it could have serious effects on the global Bitcoin network.
An increase in global Bitcoin mining efforts will reduce the odds of such a hashrate collapse. In the U.S., mining firms are one of the targets of the new bill released in Kentucky. Lawmakers have approved a bill that proposed tax breaks for mining operations set up in the state. One of the proposals in the bill was the removal of the tax duty of electricity for Bitcoin mining.
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