Bitcoin, the world’s biggest cryptocurrency, fell as much as 14 per cent to $51,541 (€43,016) on Sunday, reversing most of the big gains it made over the past week.
Bitcoin was last trading down 10 per cent at $53,991 as of Sunday afternoon, a whopping $12,000 below record highs set on Wednesday.
Smaller rival Ether, the coin linked to the ethereum blockchain network, dropped 10 per cent to $2,101.
Data website CoinMarketCap cited a blackout in China’s Xinjiang region, which reportedly powers a lot of bitcoin mining, for the selloff.
Luke Sully, chief executive at digital asset treasury specialist Ledgermatic, said in an email that people “may have sold on the news of the power outage in China and not the impact it actually had on the network”.
“The power outage does expose a fundamental weakness; that although the Bitcoin network is decentralized the mining of it is not,” Sully added.
Some widely-followed blockchain analysts on Twitter pointed to a sharp drop in “hash rate” due to the outage.
Hash rate refers to the volatility index that measures the processing capacity of the entire Bitcoin network, and it determines the power required by miners to produce new Bitcoins.
The retreat in Bitcoin also comes after Turkey’s central bank banned the use of cryptocurrencies for purchases on Friday.
Many cryptocurrency markets operate 24/7, setting the stage for price swings at unpredictable hours. Historically, retail and day traders have driven the moves.
Despite the sudden selloff, bitcoin is still up 89 per cent so far in 2021, driven by its mainstream acceptance as an investment and a means of payment, accompanied by the rush of retail cash into stocks, exchange-traded funds and other risky assets.