In the last 7 days, Bitcoin has removed almost 20% of its value. At the beginning of the week, the digital asset was testing the lows of $ 28,600. The drop has been largely attributed to the ongoing crackdown on cryptocurrency mining in China. The Chinese government has vowed to go after cryptocurrencies in recent weeks citing environmental concerns, lack of value, and their use to fund illegal activities. But is the repression of mining completely bad? David Marcus of Facebook believes that this is a great development for Bitcoin.
According to some reports, China accounts for 90 percent of the mining hash rate. This is a dangerous level of concentration in a country that, frankly, is under the control of a regime. David Marcus, who is currently the director of Facebook Financial and is a board member of the crypto project Diem, formerly Libra, noted on Twitter that the power of Bitcoin mining that moved from China to the US and other regions it was a good development that ensured decentralization.
In recent weeks, several states in the US have stepped up their efforts to attract companies related to cryptocurrencies and, specifically, Bitcoin mining.
Some community leaders have agreed with the sentiment, noting that this is a temporary drop, largely an overreaction as the market is very sensitive.
If Bitcoin mining spreads around the world, it ensures that in the future a regulatory change in a region does not significantly affect Bitcoin as it is currently witnessing.
What's Next for Bitcoin?
The price reaction has not only puzzled the Facebook executive, but CNBC's Jim Cramer as well. Taking an example from gold, I was curious why the Bitcoin mining crash was causing a price drop rather than a surge due to scarcity.
Cramer explained that the current crackdown should extend the shortage narrative by encouraging investors to hoard more. According to market watchers, this would certainly be the case for gold. Therefore, he believes that the current market downturn is not entirely based on repression. Cramer says that Bitcoin will not go up due to structural reasons.
For some market watchers, the crackdown has been a confirmation that the Chinese government is threatened by cryptocurrencies that undermine its power. Before the launch of CBDC, China seeks to undermine popular cryptocurrencies to ensure the success of its digital currency.
After briefly dipping below $ 32,000, Bitcoin has regained some momentum and is back above $ 33,000. Having weathered the initial shock, investors are looking to push prices back above $ 35,000 and establish support above this. The $ 40,000 resistance is poised to continue to evade the digital asset now more than ever. Despite this, market expert PlanB is still optimistic that it will be outmatched and Bitcoin will end the year at a conservative price of $ 135,000.