Bitcoin has been caught in the throes of a tremendously volatile trading session over the past several days and weeks, which led the cryptocurrency’s price to surge towards $8,000 after visiting $6,500 before it retraced back down to its current price of $7,300.
One byproduct of this volatility has been a significant decline in Bitcoin’s hash rate, which may point to some underlying weakness that could mean further losses are imminent.
Bitcoin’s Hash Rate is Dropping; Is a Further Price Decline Imminent?
Bitcoin’s inability to sustain the momentum that was sparked in the time since it visited $6,500 signals that bulls do not currently have significant strength, and the crypto’s recent rejection at the upper-$7,000 region that sparked this latest sell-off seems to confirm this.
Assuming that sellers push BTC’s price down further in the near-term, it will likely find some support around $7,000, with its major near-term support sitting at its recent lows of $6,500.
One interesting thing to keep in mind is that Bitcoin’s recent bearishness has come about concurrently with a drop in its hash rate – which is widely used as an indicator of network health – which may further confirm the underlying weakness that BTC’s recent price action points to.
In late-October, just prior to BTC’s meteoric rally to highs of $10,600, its hash rate hit all-time-highs of 114 million tera-hashes per second, and in the time since it has declined to 81 million tera-hashes per second.
Bitcoin’s current weakness may be significantly perpetuated if its price closes beneath $7,300 today, with one analyst noting that a decisive movement below this level could mean that the market will favor bears in the near-term.
HornHairs, a popular cryptocurrency analyst on Twitter, spoke about this in a recent tweet, saying:
“$BTC: 1W chart looked respectable earlier in the weekend at $7.8k. After morphing & looking to close below the swing lows at $7.3k it looks a lot worse. We’ll see how it closes in a few hours but with a break down on the 4H market structure shorts will be favored this week.”
How BTC responds to this key support level will likely offer significant insights into where its price will head in the coming weeks.