Cryptocurrency update: mining woes, Bitcoin slips & ETH ETF break
Bitcoin prices take another massive slide this week. Could a blackout in Chinese data centres be responsible? Away from BTC, three new Canadian ether-focused funds will debut this week.
Bitcoin takes a tumble
Things move fast in the world of cryptocurrency. It was only last week we were predicting Bitcoin to build on recent gains and start eyeing up all-time highs again. Well, flash forward to this week and all that has changed.
Bitcoin prices have tumbled since last week, dropping from over $60,000 to $52,000. At one point, $4bn in active BTC positions was liquidated. Strong stuff. As of now, BTC futures are trading around $57,000 – but still some $4,000 off the $64,000 level seen on April 14th.
As with all major BTC price swings, we find ourselves scratching our heads and asking why? There are a lot of moving parts at play here.
One potential cause is the Coinbase IPO juicing cryptocurrency markets on the whole. The world’s largest crypto exchange went public last week, and prices were being supported by the move. The Coinbase listing has been viewed as another mark of legitimacy for digital currencies, but the market froth generated may have had an adverse effect on BTC prices.
Then there is regulation. While we’ve touched on institutional legitimacy, i.e. banks and companies hurling billions into new crypto services or buying tokens themselves, but regulatory bodies still aren’t sure. India is possibly going to ban crypto trading. Turkey already has.
There are also rumours that the US Treasury is about to slap several financial institutions for money laundering using cryptocurrencies.
Essentially, a myriad of reasons could be behind the latest BTC price fluctuation. We’ve come to expect volatility in crypto markets, so this is nothing new. It will be interesting watching the market to see how fast it recovers though. Grab your popcorn and settle in.
Bitcoin hash rate drops thanks to China blackouts
Bitcoin prices will also have been affected by a slowdown in the bitcoin mining hash rate.
In a meeting of physical mining meeting digital mining, a gas explosion at a Chinese coal mine has allegedly resulted in several Bitcoin miners halting production.
Despite cryptocurrency mining not involving any physical labour, data centres have been closed to facilitate “comprehensive power outage safety inspections”, following a spate of coal mining accidents in the Xinjiang region of northern China.
Hash rate is the computational power needed to mine Bitcoin tokens on the currency’s blockchain. At the time of the accident on Friday 16th April, the global rate had dropped 25%. Less computing power means less opportunities to mine BTC tokens. The supply of the already limited currency has taken a hit.
Normally, a supply squeeze would help increase prices (scarcity + demand = high price). In this case, it appears the hash rate slump has affected the BTC price slump because it has removed mining capacity from the global network. While this is offline, mining could potentially either slow to a crawl or stop altogether.
Several major Bitcoin mining pools were hit by the power outage. Antpool’s hash rate had crashed by 24.5% in a 24-hour period, Binance Pool by 20%, BTC.com by 18.9% and Poolin by 33%.
The Xinjiang and Sichuan regions of China combined account for more than 50% of the overall Bitcoin mining hash rate. Operations based in China comprise the majority of global mining power. That partly explains the major impact such a shortage is having on BTC prices.
Three Ethereum ETFs get Canadian approval
While BTC might grab the headlines, it’s important to remember there are other cryptos out there building momentum. Ether (ETH) is the second most popular token for traders and users worldwide, and it may have just got easier to trade.
Canadian authorities have approved three new ETH-focused ETFs and they will launch on TSX on April 20th.
The three new ether-based ETFs will be provided by CI Global Asset Management, Purpose Investments, and Evolve ETFs. Both Purpose and Evolve already sponsor crypto ETFs, whereas CI will be a newcomer, backed by Galaxy Digital.
It appears that the logic to approving all three at once will be to provide more options for investors, rather than allowing a single fund to get a head start over its competitors.
Canada is becoming a bit of a cryptocurrency ETF bellwether. Alongside these three new ETFs, three Bitcoin exchange traded funds are currently listed on Canadian exchanges, including a fund run by Purpose Investments.
South of the border, the Securities and Exchange Commission (SEC) has yet to give the green light for any crypto ETFs. Eight funds are currently in the application stage. Perhaps Canada’s confidence in these investment vehicles will feed into SEC decision making?