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Bitcoin Crashes Under $8,000 and Takes Crypto Market With It

March 9, 2020 at 12:40 by Matt Jackson

Bitcoin endured dramatic losses over the weekend, mirroring huge losses experienced by stocks and especially oil. The losses can be attributed to further panic over the coronavirus, which continues to spread, and the failure of Saudi Arabia and OPEC nations to curb oil supply. Saudi Arabia’s pledge to increase supply further encouraged investors into safe haven investments like bonds. The price of gold has also increased a little on the day.

The continued spread of Covid-19 has plagued major markets in the past weeks. The US now has approximately 500 cases, a third death has been confirmed in the UK where the government is holding talks to discuss its next moves, and Italy has quarantined more than 16 million people in a bid to stem transmission of the disease.

The spread of the disease had already caused a slump in major stock markets but the situation grew worse over the weekend and in early trading on Monday. The FTSE 100 share index was down 8.5% within a few minutes of the market opening this morning. It has recovered a little but is still down more than 6% on the day.

Meanwhile, Saudi Arabia and OPEC have caused even greater losses in the oil market. The two parties failed to reach an agreement to continue to curb supply, and Saudi Arabia announced its intention to ramp up supply. Oil prices have fallen nearly 30% since the decision and Saudi Arabia has promised discounted oil prices to customers in Asia, the US, and Europe.

Gold and government bonds have benefited from these dips, however. Gold has made marginal gains on the day, and yields from US bonds are down below 0.5 for the first time ever (yields drop as prices increase).

Some commentators had suggested that Bitcoin was being treated as a safe-haven investment, in the same way as gold and bonds, when its price rise coincided with the initial spread of Covid-19. However, Bitcoin has followed stocks and oil with plummeting prices this weekend, suggesting it was nothing more than coincidence.

There are some hopes of a short-term revival for Bitcoin. The mining difficulty is set to increase in the coming days, which means that fewer Bitcoin will be created during the mining process. As a commodity’s supply is restricted, its price typically increases, and this has proven to be the case with Bitcoin in the past. At the beginning of the year, difficulty was increased by an average of 5% every two weeks for several weeks. Prices increased on the same day as the mining difficulty increased. Difficulty increased by more than 6% earlier today.

Next week, mining difficulty is set to increase by 8%, which is the largest increase in six months and could herald a revival of fortunes for the cryptocurrency. Data shows that this increase will mean that many of the most widely used mining computers will be at the breakeven point, which means that it costs as much to mine Bitcoin as the miner themselves make from the process at the current price level.

Coinbase CEO, Brian Armstrong, has warned that he does not believe that Bitcoin will be the coin that takes cryptocurrency to the fore. Although Bitcoin was the first of its kind, it is not without its flaws. There are coins with greater privacy and improved security, as well as those with quicker transfer rates and improved protocols, and many believe that it will be one of the other, smaller coins that becomes the primary digital currency of the future.

At 12:30 GMT, Bitcoin (BTC) prices are down 10.25% at $7,841.03 having failed to complete an inverse head and shoulders last week, while Ethereum (ETH) is down 11.59% and trading at $202.95. Ripple (XRP) is changing hands at $0.21, having seen prices fall by 9.38%. Bitcoin Cash (BCH) and Bitcoin SV (BSV) are down 14.13% and 13.37% at $273.58 and $196.32 respectively.

If you have any questions and comments on Bitcoin today, use the form below to reply.

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