Bitcoin markets slid back to around the US$35,000 price level over the last week. Bitcoin ends the week down ~9%, erasing the previous week of positive price performance. The second and third largest assets on the Brave New Coin market cap table, Ethereum (ETH) and Binance Coin (BNB) end the week down ~11% and 8% respectively.
On Friday, the Sichuan Provincial Development and Reform Commission and the Sichuan Energy Bureau issued a joint notice demanding the closure of 26 suspected cryptocurrency mining projects in the region by Sunday. Colin Wu, a local blockchain reporter from China, reported that most large mining farms responded to the warning by shutting down. The shutdowns appeared to have had an immediate effect on Bitcoin block production times, with some blocks taking as long as an hour to be published over the weekend.
The Cambridge Centre for Alternative Finance currently records Sichuan as the 2nd largest Bitcoin mining province in China. Historically Bitcoin miners have shifted operations to Sichuan during the middle of the year to take advantage of the cheap hydroelectricity available in the region during its wet season.
China’s ongoing crackdown of cryptocurrency mining which began last month has already had an effect on Bitcoin’s hashrate output and distribution. The network’s hashrate is down 27.9% since May 14th and currently sits at around ~102 million terra hashes per second (TH/S) having been as high as ~199 million TH/S in mid April.
Foundry USA, an US-based mining operation run by the Digital Currency Group, has now risen to become theworld’s 7th largest hashrate producer. Mining pools with dispersed mining operations like ViaBTC managed to maintain smaller declines in hashrate than pools like Antpool and Binance which observed 24-hour hashrate drop-offs that were as high as ~25%.
Since Friday the Bitcoin price has dropped by ~6%. Opinions differ on whether the price of Bitcoin follows its hashrate or vice versa. In the current context, hashrate is dropping independently of price because of the moves being made by Chinese regulators, the question for investors now is whether this will drag price downwards as well.
Crypto news for the week ahead
This Wednesday, Binance NFT, the exchange’s new non-custodial NFT marketplace, will launch with an inaugural “100 Creators” program that features content from creators from around the world. The exchange will launch as an alternative to Ethereum’s NFT ecosystem with a focus on ease of use and minimal transaction fees. The price of BNB is down ~8% this week.
The road to Ethereum’s July 14th London hard fork - which will come with a major overhaul of the network’s gas model - is well underway. This Wednesday, a version of London will launch on Ropsten, the Ethereum test network that most closely resembles the real thing. London and EIP1559, one of the key updates launched as part of it, is set to make gas fees more reliable and consistent. The price of Ethereum is down ~11% in the last week.
Top 10 Crypto Summary
It was a difficult week for large-cap assets on the Brave New Coin market cap table. DOGE was one of the biggest losers in the last week falling by ~14%. On a recent podcast appearance, FTX exchange CEO Sam Bankman Friedman describes Dogecoin as the asset of the year for 2020 and 2021. He said this is because Dogecoin best reflects our current economic situation, the asset “we have all chosen, that we all deserve—for better or for worse.”
Bitcoin Price Chart
The Bitcoin price dragged down for most of the week before the news of the Sichuan mining crackdown on Friday triggered sharper sell-offs. Glassnode, however, reports that a key fundamental metric has recently flipped bullish. The net Bitcoin held on exchanges was negative for the first time since early May. This suggests Bitcoin is moving into private wallets and selling pressure in markets is slowing down.