Today, bitcoin prices broke the $5,000 barrier on their way down, as the market experienced a meltdown today, with most cryptocurrencies experiencing double-digit losses. This is also accompanied by a hash power decrease that will accompany this drop and the correspondent operativity compromise. This will likely endure till bitcoin prices reach again break-even levels for miners.
Bitcoin Prices On Their Way Down
Today, bitcoin prices blew the floor support of the $5000 level on its way down and continued to keep dropping. Bitcoin is at its lowest level in 13 months, trading at little more than $4700 at the time this article is being written. This sudden drop has triggered a nervous selloff that has also dragged the whole cryptocurrency market with it.
Most of the media covering this whole mess coincide that the main culprit is the contentious hard fork of Bitcoin Cash. This made the whole market unstable with people cashing out to other currencies. However, Bitcoin Cash took the worst hit. Its prices are down by more than 40% today.
This selloff caused congestion in the bitcoin mempool, with a big number of transactions waiting in queue to be processed. Unfortunately, this is the consequence of too many people wanting to cash out due to fears of an even greater drop. If this continues, fees will rise to near last December levels, making micropayments unpractical.
Operativity Of Bitcoin Compromised
This whole pricing mess also affects something more important: the operativity of the bitcoin network. With these prices as they are, miners are working at a loss, unable to pay for their operative expenses. Some mining companies can cope with the load, but the real question is for how long? Break-even prices are at the $6,000 level, as calculated by Tom Lee from Fundstrat.
If this situation keeps up, we see a drop of the hash power that fuels the bitcoin network. More and more miners will shut down their machines unable to cope with the prices. They will undoubtedly return to mine when the price is again up, but that will affect the security and operativity of the bitcoin network.
There is no indication if this is the end of this drop or if this will continue to get even lower. some traders say that the new support level could be around $3K, but the reality is that no one knows for sure. The bullish predictions won’t be able to come to the fruition, even if Bakkt impulses the market with institutional investors getting in, because they will be most likely scared with these latest developments.