There are many reasons the price of Bitcoin is dropping again, not the least of which is the fact that it has been a volatile asset since the Bitcoin whitepaper came into being back in 2008.
Before getting into the technical reasons for the drop, it’s important to keep in mind that in mid-March, the price plummeted all the way to $3,100 amid broader market fears of the coronavirus. A total dump of volatile assets like Bitcoin ensued.
More recently the price rose all the way to nearly $11,000 USD and now at the time of this writing, the market is hovering around the $9,500 mark.
Even the novice investor who is new to Bitcoin probably understands that a 50% swing in an asset within a few months both up and down can probably be attributed to many reasons. That’s definitely true for Bitcoin and other digital assets. Veterans in the game know these kinds of swings very well. Rather than taking the simplified approach and assuming that investors are just taking profits or manipulating the market, let’s look at how behavior is reflected in the technical aspects of activity across the Bitcoin network.
The Most Recent Drop in Bitcoin Price Explained
Between May 23 and May 24, 2020, the Bitcoin price declined over $420 from $9,200-$8780. That’s a considerable 5% drop in a very short amount of time. Earlier this week Bitcoin actually dropped 8% in the span of five minutes. Both drops are nothing compared to what happened to the market in March.
Still, regardless of where the price is now, it’s important to note Bitcoin is still more than 50% below the all-time high of just over $20,000 USD achieved in December 2017. Again at the present moment it means that Bitcoin is currently worth over $249 million and the project is responsible for more than 65.5% of all of the liquidity invested in digital assets.
What’s the reason for the drop now? It’s the fact that Bitcoin’s price has historically retraced after a halving event. The halving event is what happens every time 210,000 blocks of Bitcoin transactions are validated by nodes securing the network. This is known as mining which we’ve covered before.
Bitcoin Trends Occurring Right Now
They say men lie, women lie and numbers don’t. Some of the trends occurring on the Bitcoin network right now are very interesting to take note of. One is at the Bitcoin network is an estimated 159 million kilowatt hours of electricity. On an annual basis that equates to 58 tetrawatt hours per year. Assuming nobody reading this is an electrician, let’s put that into perspective.
58 tetrawatt hours is enough electricity to turn on the lights in more than 5.4 million households across America. It also represents 0.26% of the entire globe’s use of electricity. Regardless of whether or not institutional investors think that Bitcoin is valuable or whether 50 years from now every consumer on the planet and abusing it as real money, that’s a lot of electricity!
What Will Bitcoin Whales do Next?
It’s estimated that at the present moment, more than 12,600 Bitcoin wallet addresses contain at least $1 million worth of Bitcoin. That’s over $12.6 billion. To put it in perspective Bitcoin’s market capitalization currently sits at around $163 billion. That means 7.7% of all the bitcoins in the world are owned by just 12,600 addresses. Certainly some of those addresses belong to large mining pools or groups of people, but many of them are likely just individual whales. That’s what makes the question of ‘what will whales do next?’ valid.
The short-term answer is that a selloff will likely continue. Some experts are predicting the Bitcoin price will drop as low as $2,000 before it shoots back up. By the same token, others believe that while a 30 to 40% drop from the recent high of $11,000 is not out of the question, the ultimate result of this most recent third halving event will be a significant rise in Bitcoin’s value in the long term. But as usual in gambling and in investing, past results don’t necessarily guarantee future outcomes. Only time will tell what happens next.
Disclaimer: This article is for informational purposes only and does not express the opinion of Bitcoin GG. It is not meant to be taken as advice to buy, sell or invest in cryptocurrency.