Bitcoin price continues to crash. Burned by the announcements of the US Federal Reserve, investors prefer to abandon the riskiest assets. At the same time, revenues generated by mining farms are plummeting. Explanations.
The year starts very badly for the price of Bitcoin. After last year’s bull rally, the digital currency has not stopped to lose value. The price of Bitcoin first retreated around 42,000 dollars, dragging all cryptocurrencies in its wake. Behind this brutal, but customary drop in digital assets, there was an announcement from the US Federal Reserve, which announced the precipitation of the end of financial support measures intended to stimulate the economy.
Shortly after this first blow, the price of Bitcoin continued to plunge. The price of the oldest cryptocurrency has fallen back below the 40,000 dollar mark, probably following statements by the Russian central bank. The organization called for prohibit bitcoin mining and use.
Bitcoin, altcoins and the financial markets are completely unscrewing
Despite growing adoption around the world, the price of Bitcoin continued to fall. The digital currency has entrenched around 35,000 dollars, down 4.3% on Saturday January 22, 2022. This is its lowest level since last July. This is a decline of 50% compared to its historic record of last November. That month, the price of Bitcoin had approached 70,000 dollars.
As is always the case, the fall of Bitcoin caused a bloodbath in the altcoin market. Most of the cryptocurrencies on the market, such as BNB, Ether, CRO or MANA, have recorded sharp declines in the space of a few hours. The entire cryptocurrency market has lost over $1.3 trillion in capitalization since November.
Note that this general collapse is not confined to cryptocurrencies. All of the financial markets are in the red at the start of 2022. For example, the Nasdaq, and technology stocks such as GAFAM, have suffered heavy losses.
Obviously, investors withdraw their funds from the riskiest assets, which generated strong profits while the US Federal Reserve’s support measures kept the economy afloat. “Liquidity will be less abundant, forcing investors to be more selective. As the earnings season begins with banking stocks in the United States, traders seem to be anticipating a slowdown in earnings growth”, explains Alain Guélennoc, head of Federal Finance Management, at Capital. The US central bank is in danger of raise interest rates several times This year. An announcement that arouses the fear of investors.
Bitcoin Miners See Lower Profits, Here’s Why
The fall in the price of Bitcoin also leads to a drop in miners’ income of the currency. The more the currency is valued, the greater the income received by the owners of a mining farm. With the continuing fall in the price, miners’ incomes have contracted.
Along with its price crash, the difficulty of mining Bitcoin has skyrocketed. This January 20, 2022, the network difficulty adjustment algorithm, set up by the creator Satoshi Nakamoto from the genesis of the protocol, increased by 9.32%.
In order to keep a stable mining rhythm, the Bitcoin network updates its difficulty level every 2,016 blocks according to the power of the mining infrastructure. The difficulty is directly related to the power of the network. The mining ban in Kosovo and the nationwide internet blackout in Kazakhstan initially caused a drop in power. This decline was accompanied by an increase in mining complexity.
Despite this uncertain and complicated context, many analysts continue to believe in the future of bitcoin. According to a new report from Bloomberg Intelligence, the research-based division of Bloomberg, the price of Bitcoin will cross the $100,000 mark in the next 5 years. In addition, many well-known companies continue to invest in the sector. Intel is also preparing to launch a chip 100% dedicated to cryptocurrency mining.