Over the last week, cryptocurrency prices have taken sharp drops following China’s crackdown on crypto mining. Across the world, experts now warn of an impending “death cross” for the crypto industry.
Around $400 billion in value has already been wiped from the total digital currency market since Friday.
How’s the crypto space faring?
Bitcoin prices began sliding after the Chinese government forced 90%+ of the country’s Bitcoin mining operations to shut down.
According to reports, China’s central bank issued an unambiguous instruction to freeze all payment channels supporting cryptocurrency trading. The country has already banned financial institutions from providing crypto-related services.
China’s crackdown has led to a significant decline in Bitcoin’s processing power. For one thing, China mines an estimated 65% of Bitcoin globally.
Bitcoin, the world’s largest digital currency, experienced a wild trading session. It fell as low as $31,760 Monday morning, dropping below $32,000 for the first time since June 8, 2021, according to Coin Metrics. On Tuesday, it briefly dropped below $30,000 before rallying back into positive territory.
Smaller rivals like Ethereum and Ripple also fell 12%. Other leading cryptos like Cardano, and Binance all dropped by around a quarter
Of the top 10 cryptocurrencies by market cap, the hardest hit has been Dogecoin despite its recent rise to prominence. The memecoin seems to be going wherever the opposite of “to the moon” is as it lost more than a third of its value in just one week.
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Is a death cross next door?
Financial experts are already warning about an approaching death cross. In crypto space, a death cross occurs when the 50-day moving price average falls below the 200-day moving average. In other words, it’s when the short-term average price of a coin drops below its long-term average.
A death cross could lead to the failure of most of the world’s NFT (non-fungible token) platforms and signal the arrival of a bear market.
If a death cross is reached, this could mean that most crypto assets won’t work with 90% of all NFTs failing in three to five years.
This is not the first time the industry is witnessing a death cross. There have been 6 past death crosses in Bitcoin’s lifetime since 2013 with 4 resulting in enormous downsides. The last two that didn’t lead to a downtrend for the cryptocurrency were towards the end of a bear market–resulting in massive gains.
Looking ahead
Ups and downs in the cryptocurrency industry are not new. For what it’s worth, this drop pales in comparison to the close to 50% drop the top digital currencies registered in late April and early May this year.
While a death cross can prove catastrophic as seen during the Wall Street crash of 1929 and the 2008 Financial Crisis, cryptocurrencies can be harder to pin down.
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