Bitcoin’s decline of around 46 percent since its peak of $126,100 in October has brought up important discussions about market dynamics. While recent opinions suggest that the reason for this decline may be an upcoming quantum computer threat; Some market observers point to changes in capital movements, liquidity conditions and mining economies.
Quantum Computer Discussions and Market Implications
Bitcoin developer Matt Corallo countered claims on the Unchained podcast that quantum computing concerns are at the root of weak pricing in the market. Corallo pointed out that not only Bitcoin but also Ether lost value in a similar manner in the environment where the quantum threat was on the agenda, and stated that this situation weakened the claims. He said investors tend to look for justification for weak market conditions at times.
Quantum computer risks have become more visible, especially with asset management companies’ regulatory updates and some funds citing this issue as a possible security risk in their Bitcoin ETF documents. BlackRock drew attention to the quantum computing threat within the scope of the iShares Bitcoin ETF application last year.
Mining, Artificial Intelligence and Competition Increase
Corallo stated that crypto assets compete with other capital-intensive sectors for investors. While interest in artificial intelligence infrastructure has increased in recent years, especially through data centers and powerful hardware, some of the capital has begun to be channeled to these areas. Large data centers, special chips and high energy capacity required for artificial intelligence attract the attention of investors in this direction.
Looking at mining data, Bitcoin’s mining difficulty saw the largest increase since 2021, rising to 144.4 trillion. The difficulty is adjusted per block approximately every two weeks, adjusting for changes in total processing power on the network.
With the decline in prices, there was also a significant decrease in Bitcoin’s mining power. While the hashrate was at 1.1 zettahash/second in October last year, it dropped to 826 exahash/second in February; Nowadays it is approaching 1 zettahash/second again.
Despite the current difficulties, expansions continue at the company level. Hashprice, that is, daily revenue per processing power provided, is at its lowest levels in recent years. Large-scale mining companies, especially those with the advantage of low-cost electricity, continue to increase their activities. It is stated that the United Arab Emirates derives a significant potential profit from mining.
On the other hand, many publicly traded mining companies have started to direct some of their energy and computing resources to artificial intelligence and high-performance data centers. As an indicator of this transformation, Bitfarms removed the phrase “bitcoin” from its corporate brand identity. Additionally, Starboard Value demanded that Riot Platforms increase its investments in artificial intelligence data centers. These developments show that Bitcoin is competing with new technologies to attract direct capital.
Market Sentiment and Consolidation Process
Onchain data indicates that the squeeze in the market continues. Analytics firm Glassnode noted that its “True Market Mean” model, which tracks the cost base of Bitcoin’s active supply, is below the approximately $79,000 level. The realized price is around $ 54,900, which constitutes the limit of the downward structure.
Bitcoin has been moving around the $60,000 to $70,000 range lately. Market sentiment remains fragile and the Crypto Fear and Greed Index has been at “extreme fear” levels in recent weeks.
Bitwise’s European Research Director André Dragosch shared the view that Bitcoin’s current market value remains low compared to the global money supply, gold and exchange-traded commodity flows, and emphasized that a consolidation process rather than a rapid recovery is likely to come to the fore.
Macroeconomic developments are also followed closely. Core PCE inflation data to be announced in the USA and possible policy steps of the Fed may be decisive on the market direction. Although high inflation expectations are perceived as positive for scarce assets, a hawkish central bank rhetoric can put pressure on risky assets. At press time, Bitcoin is trading around $67,000.
