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Bitcoin Price Explores New Lows as Mining Rigs Shut Down in China

November 23, 2018 at 13:31 by Arathur Stephen

Bitcoin (BTC) mining operations in the US and China are facing mass closures following the drowning nature of price of Bitcoin. The mining business no longer seems profitable at the current dwindling price. The flagship cryptocurrency is currently trading at around $4,000 on Friday, having lost about 25% of its value in the space of a week.

Bitcoin mining process involves generating new units of the digital coin by solving complex puzzles and it usually requires a huge amount of electricity to power the computers carrying out the calculations.

This, however, means that the profitability of mining collapse when Bitcoin’s price falls, and if the price declines deeply, then, operations may no longer be seen as economically viable.

Bitcoin mining firm Giga Watt files for bankruptcy

So far, the biggest casualty may be the US-based Bitcoin mining firm, Giga Watt, which was forced to file for Chapter 11 bankruptcy on Monday with debts of around $7 million still owed to creditors. As per CoinDesk, the filing stated:

The corporation is insolvent and unable to pay its debts when due. The corporation and its creditors would best be served by reorganization of the corporation under Chapter 11 of the Bankruptcy Code.

Chinese Bitcoin miners drop out of business

In a related development, the cryptocurrency miners in China are reportedly dropping out of business as they are selling the machines as scrap, even pricing the devices per kilogram versus selling them individually. This selloff was reported on Wednesday by local Chinese crypto outlet 8BTC with reference to the crypto mining pool F2Pool.

The electricity costs of Bitcoin mining operations in China are some of the lowest in the world. Still, amidst the cheap electricity, images and videos of mining operations closing down in the country have been wide-spread across social media.

Meanwhile, according to the South China Morning Post, a Hong Kong-based mining firm, Suanlitou has also announced this week that it was unable to pay electricity fees for a 10-day period in November. It further added that it was canceling all orders for new mining equipment.

Other Chinese mining platforms have also been forced to follow the same move as some report suggests that over 20,000 mining rigs have shut down due to the fall in profitability. As per local Chinese outlet Tencent News, others crypto miners have been forced to sell at least four older models of Bitcoin mining machines, including the Antminer S7, Antminer S9 as well as Avalon A741 from Canaan Inc. as they have become quite expensive to operate under current market conditions.

While it is not clear at the moment what the future holds for the price of Bitcoin, some analysts are predicting the price to drop to $1,500 while others expect BTC to rally to $15,000 before the end of 2018.

BTCUSD technical analysis

The crypto markets experienced widespread decline throughout last week, with the price of Bitcoin plummeting to as low as $4,300 per coin.

On Friday, the BTCUSD pair dropped below the 61.8% Fibonacci retracement level of the last wave from the $4,048 lows to $4,600 highs. The ongoing bearish trend has opened the doors for more losses below the $4,250 support level as it seems like the price may soon test the last swing low at $4,048.

However, if the bears continue to be in charge, there are high possibilities of a downside break below the $4,000 handle in the near term. Hence, the next support level is placed near $3,900. Moreover, it coincides with the 1.236 Fibonacci retracement level of the last wave from the $4,048 low to $4,600 high. Below this, Bitcoin price might perhaps drop towards the $3,800 level.

In conclusion, the BTCUSD pair is clearly under bearish pressure below $4,400 levels and there might be a sharp decline below $4,000 handle if sellers remain in action in the short term.

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

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