Quantitative easing may be triggering BTC deviation from traditional markets. The initial decline of the markets seen in the past two weeks pulled BTC price with it. After continued US federal intervention, BTC is beginning to deviate from markets. Mining has followed this price pattern slightly but with a 1-2 week lag and with more overall volatility.
Onset of Coronavirus
Coronavirus has put the world market into a global recession. Many countries in Asia, Europe, and the Americas are on lockdown. Businesses have struggled to stay open during this time, and many are closing.
Coronavirus hit the Asian markets first, causing a disruption in the electronics supply chain. Bitmain stopped production in Febuary as did other leading fabricators of rigs. Supply became limited for new mining rigs, and the dramatic rise in hashrate seen in early Q1 came to a halt.
After Europe and eventually the US enacted restrictions on travel and activity, the global markets saw an extreme decline. The S&P 500 index fell over 20% in March. Bitcoin followed the markets, but at more drastic measures.
Bitcoin started March trading at around $8,500 and reached an all time high hashrate of over 136 EH/s. As the global markets began to fall more significantly, BTC market price dropped down to lows of below $5,000. Hashrate followed, reaching levels near 80 EH/s in mid March.
The US federal reserve announced an injection of over $1 Trillion USD into the U.S. economy on March 12th. Markets fluttered in reaction but continued to decline through March 20th. During this time, speculation rose around continued federal intervention to ease market losses. Bitcoin’s market price began to deviate from market indexes during this continued speculation of increased federal quantitative easing.
Bitcoin deviation from markets
Bitcoin went from $4,800 to around $6,200 during the week of March 16th. Drawing a distinct deviation from U.S. market indexes for the first time of the recession, Bitcoin confirmed notions that quantitative easing would stimulate bitcoin price. Hashrate has since fluctuated with this increase in price, going between 80 EH/s and 130 EH/s.
The U.S. federal reserve announced on Monday, March 23rd announcing it would enable unlimited bond buying to qualm the markets. The markets have reacted strongly with the Dow Jones rising more in two consecutive days since 1987.
While Bitcoin market price rose slightly during the week of March 23rd, it is still hovering under $7,000, and is not seeing gains similar to the markets, showing further deviation.
As Bitcoin and other cryptocurrencies are seeing hope in detachment from the qualms of market instability, supply of new mining rigs is on the rise. Chinese manufacturers are going back to production this week. Additionally, Bitmain recently announced the Antminer S19, touting hashrates of over 110 TH/s per machine (although deliveries may not arrive until the day after the halvening).
The coming months are looking to be exponential for BTC price and hashrate. The measures being implemented by the Federal Reserve are more extreme than actions taken in 2008. The halvening symbolizes the deflationary nature of Bitcoin and other leading cryptocurrencies. 2020 may be the beginning of a global recession but a year of growth for cryptocurrencies.
Written by Nate Christenson
hashPoWah editor, eCommerce Program Manager