As we see before our eyes Bitcoin crashing down to mid 7000 today, this is certainly the talk of the town.
The crash even made it to trending news on Weibo, China’s social media equivalent of Twitter. To that note, in comparison to other types of financial assets, it certainly seems like Bitcoin has gone mainstream in China. Here we share a list of reasons and speculations from the Chinese community on why the price is dropping:
- The most popular opinion is that as a result of Bakkt Bitcoin futures’ opening was received so poorly, the negative sentiment drove bitcoin prices down.
- Some have suggested that, given now that the raining season and therefore low-cost electricity period is over in China, it can be interpreted that China’s “summer power surplus” is over. Bitmain and all of the mining machine makers have taken advantage of the low electricity cost season and have sold out all of its mining machines. [To learn more about this, checkout the post in where we interview a trading firm in Hong Kong on the topic that”miners are potentially keeping Bitcoin above 10k to boost up mining rig sales“.] More specifically, it is reported that in the past three months, mainstream miners such as Canaan, InnoSilicon, Bitian and MicroBT have successively produced new mining machines to seize the market, launching over 600,000 new mining machines into the market, effectively driving up Bitcoin’s computing difficulty. In fact, Blockchain.com’s data shows that bitcoin computing power has surpassed the historical high of 98.5 EH/s in recent days. In the past 30 days, computing power has increased by more than 30%, which is equivalent to a 200% increase since last December. The data also shows that the difficulty of mining is also adjusted to a new record of nearly 12T. So as China’s raining and wet season is coming to an end, the market seems to be gradually getting colder as well.
- Another market shock took place after the Exchange Huobi founder Leon Li Lin cleared out all his Weibo (Chinese Twitter) posts, which sparked a lot of speculation and got people worried about the potential regulatory pressure on cryptocurrency trading in China. But Li came out later explaining that what he had done was simply for safety considerations since he had not used Weibo for years.
- Many people also believed that the Bitcoin’s plunge is related to the expiration of the quarterly contracts on OKEx and CME. Vice president of OKex Strategy, Xu Kun responds, claiming that: The drop is driven by the fact that many factors supporting the rapid rise of BTC are gradually being digested by the market and there are no new drivers. For example, Bakkt, which has been trending for quite some time, has not immediately brought good surprises to the market. Contract products are essentially magnifying glasses of market sentiment, and the expiration of contracts is one of the objective market conditions, not a decisive factor. He and the team continue to emphasize that the market is pessimistic about the BAKKT exchange, especially for large and institutional investors.
- Some traders anonymously revealed that Bitmex, the cryptocurrency exchange that offers 100 times leverage, issued a margin call notice, which may have driven the currency price to decrease.
- Another proposal is that short selling may be driving down the Bitcoin price. Some say that for many institutions that want to enter the market, they want to enter at a low price. Therefore, they can only do it through short-selling. Bitcoin getting short this time could potentially signal that the market game may gradually shift to an institutional game. Some folks argue that Bakkt cannot possibly drive the trend of the entire market, only large movements in Bitcoin can drive more trading opportunities and attract institutions. This downward breakout will also attract market attention through volatility. After all, the derivatives exchanges can only have more trading opportunities and income in the early stage when the market fluctuates.
- According to some technical analysis, BTC is experiencing a three-month consolidation. It has failed several times to break the resistnace and finally fell below 9880 (OKEx quarterly contract price), forming a decline. They mentioned that $9,000 is a main support position, and when Bitcoin falls below this level, it triggers a wave of selling.
These are selected comments from articles shared on Chinese media as well as Chinese Wechat groups. We’ll update this as we continue to hear from the community.