Last month, the People’s Bank of China (PBoC) issued a document criminalizing all cryptocurrency activity virtually. When the memo began to circulate online, the price of Bitcoin (BTC) fell by more than 6.5 per cent. However, industry analysts quickly argued that the announcement could have been the perfect dip-buying opportunity.
China’s crypto crackdown began years ago. Miners began to migrate out of China. Hence, Bitcoin experienced its most significant mining difficulty decline of over 28 per cent in July of this year.
Moving forward to October, Bitcoin mining operations appear to be on the mend. According to Glassnode, an on-chain analytics firm, BTC’s hash rate has primarily recovered from the drop caused by China’s crackdown.
According to the firm’s “Week On-chain” report, both BTC’s hash rate and mining difficulty are on a constant path to recovery.
Sacha Ghebali, director of business and strategy at cryptocurrency data provider TheTie made a statement. He said that following the prohibition, many miners purchased hash rates from Chinese miners. Hence, along with the increase in institutional mining activity in the United States, may account for the hash rate recovery.
Bitcoin’s price should have climbed early this month in reaction to rising anticipation that such an ETF will be approved by the Securities and Exchange Commission of the United States (SEC). Bloomberg senior analyst Eric Balchunas believes approval is 75 per cent certain. China’s crackdown appears to have had less of an impact on the market. The idea of a Bitcoin ETF in the United States had far worse impact.
BTC whales buy the dip
Blockchain statistics suggest that significant players took advantage of the PBoC memo’s price drop in Bitcoin to buy the dip and add additional BTC to their stashes. Ki-Young Ju, CEO of crypto analytics firm CryptoQuant, announced on Twitter that someone purchased “up to $1.6 billion worth of BTC via market orders” on a controlled exchange in under five minutes.
Markets initially fall off in response to bad stories from China. According to Kraken Intelligence BTC has traditionally “gone on to rally more than +50 per cent in the 90 days that followed.”
Data from Glassnode shows that the number of BTC addresses holding more than one coin reached a four-month high this week. This indicated that whales and long-term holders were not the only ones accumulating BTC after the restriction.
Unique Bitcoin addresses
Other variables such as the United States’ response to China’s cryptocurrency ban may explain Bitcoin’s price rebound. Hence, the number of unique Bitcoin addresses used on the blockchain has also increased.
It’s hard to know how many people use Bitcoin because any entity can generate hundreds, if not thousands, of addresses. Most users only have one or two active addresses. Hence, unique address numbers are frequently used to assess user levels on the blockchain. Whether cryptocurrency market participants gained confidence due to China’s outright ban, ignored it and expected higher growth in Q4, or adopted crypto to avoid capital regulations.