You may have noticed, but just before bedtime last night, the price of bitcoin very hard. First through the 40,000 euro limit and then further and further. What was going on?
A causal relationship can never be established with complete certainty, often several factors play a role. We look at two of them in this article.
US central bank rate hike
While we would like to see it differently, bitcoin is highly correlated to the stock markets. At the end of last year, the 100-day correlation coefficient of Bitcoin and the S&P 500 stood at 0.33, one of the highest of 2021. A coefficient of 1 means that both assets behave like Ronald de Frank de Boer, while minus-1 is late. see them moving in opposite directions.
As such, last night’s and this morning’s falling price may be related to similar but milder losses in the stock market. The Nasdaq lost 3.3% in the past 24 hours, while the S&P 500 lost 1.9% over the same period.
Those stock market losses are attributed to the US Federal Reserve. The FED said it will begin raising interest rates in the coming months. This in turn causes all kinds of different emotions about inflation.
It is believed that this rate hike could come as early as March at the earliest. The fear of such a big decision in such a short time frame may have made investors choose money for their eggs.
Unrest in Kazakhstan causes Bitcoin computing power to fall
Kazakhstan declared a nationwide state of emergency early this week as citizens protested the rise in fuel prices. This has since led to the resignation of the government.
From NOS writes: ‘The resignation of the government and the measures taken by the president follow a restless night, in which protests against the prices of liquid gas were held until the early hours in various places. On New Year’s Day, the price of LPG suddenly rose from 50 to 60 Kazakh tenge (10 to 12 euro cents) to 120 tenge (24 euro cents) per litre. That led to great indignation among many Kazakhs, who often drive cars with an LPG tank.’
As a result of the protests, the government of Kazakhstan shut down the internet, according to nu.nl, which resulted in many bitcoin miners going offline.
According to the University of Cambridge, Kazakhstan accounts for about 21.9% of the global hash rate.
According to data from Coinwarz, computing power dropped from a peak of 194 EH/s on Jan. 4 to a low of 168 EH/s during the internet outage in Kazakhstan. The internet ban is probably the reason behind the decline in global computing power online.
The declining computing power may not have resulted in a direct fall in prices, but it probably contributed to the negative sentiment in the market.
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