Evergrande’s impact on Bitcoin highlights how cryptos still have growing pains

According to leading analysts, the downturn in the crypto market is nothing but investors rushing to liquidate their crypto funds for fear of China’s crisis disrupting the largest global financial balance. Moreover, professional traders are using the volatility to book profits by buying the dip and selling during recovery.

Bitcoin miners, on the other hand, are holding on to their funds for dear life — or HODLing — even as it gets more difficult to mine for the cryptocurrency. Moreover, it’s not private currencies under attack right now. If any cryptocurrency has something to worry about, it’s stablecoins like Tether.

The crypto market has dipped below the $2 trillion market for the first time in two months with leading cryptocurrencies like Bitcoin, Ether, Cardano, Solana and others taking heavy hits.

The first downturn was brought on when El Salvador went live with its new Bitcoin Law but the latest crash is due to instability on the other side of the world — China. The country’s real estate giant, Evergrande, has racked up more than $300 billion and is unable to shell out enough for the interest payments.

The trouble with this crisis is that the assertion of Bitcoin being ‘ digital gold’ is now in question. The term implies that the cryptocurrency is a safe haven asset that will hold out against market stress or high inflation. Instead, it’s acting more like a company listed on the stock market where investors are rushing to sell to have more cash on hand amid a riskier global financial outlook

“Yesterday’s sell-off is another example of how BTC hasn’t completely decoupled from global financial markets… The goal is to establish a distinction on how the crypto market performs vs the global financial market, but it will take time as more and more financial institutions move part of their portfolios into crypto.”

Iqbal V. Gandham, Vice President of Ledger, a blockchain-based security solution, told Business Insider in a statement

To make it worse, as the crypto market was falling, the value of gold and government bonds was on the rise. Advocates of cryptocurrency argue that Bitcoin and its fellow cryptocurrencies are still relatively young — their volatility is likely to decline as the market grows and matures.

“Examples of systemic growth are better predictors of future performance than the price of Bitcoin alone. But because of increased regulation, attention, and broad adoption — we will continue to see everyday investors and financial institutions utilize cryptocurrencies and validate the underlying value proposition of digital assets over the long term.”

Bobby Zagotta, US CEO of crypto exchange Bitstamp, told Business Insider in a statement.

One would think that with Bitcoin’s price going down, again, it is getting more difficult to mine — its hashrate increased for a fifth consecutive week — miners would be looking to get rid of the Bitcoin in their coffers as well.

However, crypto analytics firm Glassnode, notes that miners have been holding onto their reserves. “Miners have accumulated 14,000 BTC in unspent coinbase rewards over a 6.5 month period,” said the weekly report.

“In a continued display of network resilience, Bitcoin hash-rate has climbed again this week, reaching approximately 137 Exahash on a 7-day MA basis,” said Glassnode’s report date September 20.Glassnode

And, even with the difficulty to mine for Bitcoin on the rise, it’s still 58% away from its peak in May. According to the company’s weekly report, this means that around a quarter of the miners seen during the all time high continue to remain offline.

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