Why is Bitcoin’s price crashing?

At the time of writing, the price of Bitcoin (BTC) is sliding dangerously down a slippery slope.

BTC has dropped close to 20% in value since last week, causing more than $100 million worth of Bitcoin long positions to be liquidated on derivatives exchange BitMEX.

So why is Bitcoin’s price falling so dramatically? By diving deeper into Bitcoin’s hash rate behaviour and taking a look at trends over the last year, I will look to answer questions such as:

  • Has interest in Bitcoin dipped?
  • Who has been buying BTC?
  • Is Bitcoin’s hash rate linked to price?
  • What is the long-term expectation for BTC?

Interest in Bitcoin

First, let’s take a look at the level of interest in BTC over the past year.

The graph above (courtesy of Google Trends) shows the total number of people searching for Bitcoin on Google this year. We can clearly see that general Google searches peaked in July – coincidentally around the time Bitcoin reached its yearly high of $14,000.

This trend matches the trend seen during the late 2017 crypto bull run. Peak interest in Bitcoin from the general population was unsurprisingly when BTC hit $20,000.

How is general interest at the time of writing? It’s near yearly lows – a sign the market has been consolidating for the past few months.

So who has been buying Bitcoin over the last year? Is it retail investors, institutions, individuals, or Bitcoin whales?

Recent Bitcoin buyers

One of the most important drivers for price appreciation, as discussed here, is the number of buyers being higher than the number of sellers.

That seems pretty obvious, right?

However, to achieve this outcome, we need large Bitcoin holders to feed the market as price rises. Therefore, one of the key metrics to look into is the number of Bitcoin addresses holding large sums of Bitcoin.

At current prices, 1,000 BTC represents about $7,000,000. The graph above (courtesy of GlassNode) shows that from late 2018 to today, about 600 addresses with over 1,000 BTC were created – or funded to be…

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