Why is the cryptocurrency market falling again? Will the dream of an eternal bull market never come true?

After Bitcoin fell from $60,000 to $30,000, dragging other currencies down with it, most people thought that the correction was over and Bitcoin was preparing for an epic sprint directly to $100,000 or even higher. However, the opposite happened. After a small increase, the price continued to fall, and the total market value of cryptocurrencies lost as much as $500 billion in the past week. This is caused by several factors: the loss of Chinese miners under strict regulatory measures, potential manipulation, and traditional market cycles.

While most investors know that cryptocurrencies are speculative and can crash at any time, no one likes to see their investment drop by 20% or more overnight. But that's exactly what happened in the crypto market recently. Due to the sharp correction last month, the price of Bitcoin and other cryptocurrencies has shrunk significantly. Many of Bitcoin's daily fluctuations have no real reason and are difficult to correlate to news events. However, this recent crash may have a stronger correlation with real-world events.

One of the biggest news in the cryptocurrency space over the past few months has been China’s ban on cryptocurrency mining, following a ban on trading cryptocurrencies that began in 2017. Since 65% of Bitcoin’s hashrate comes from mining machines in Chinese mining facilities, miners in all provinces, whether they use green or non-green energy, have been forced to shut down, which has directly led to a decline in the hashrate of the entire Bitcoin network. The reason why the Chinese government issued this ban is to protect investors from the crazy and speculative nature of the market, and of course it is also likely related to the current launch of the central bank’s digital yuan. Since the ban came into effect, the hashrate, which measures the security of the Bitcoin network, has been falling sharply and is now down more than 44% from its all-time high. This has caused panic among some investors, who believe that this is a sign of the end of the Bitcoin wave.

While it is true that the short-term outlook for Bitcoin is negative due to the mining ban, it will have a positive impact in the long run. Miners will be forced to move to other areas, which will help decentralize the network and promote the use of green energy. Even if the network is temporarily no longer as healthy as before, once the miners have moved, it is almost guaranteed that the network will quickly return to normal or even be more stable than before. In addition, the hash rate of the entire network is still five times higher than the previous bull run in 2017, which means that the network is still very secure.

Another possible reason for the cryptocurrency downturn comes from the potential manipulation by Bitcoin whales. Due to the lack of regulation in most countries, it is entirely feasible to manipulate the price of Bitcoin, allowing the largest holders to change the price for profit. This means that some of the world's largest companies, hedge funds, and individuals may be working together to suppress the price of Bitcoin and buy more Bitcoin after the decline. While this is completely speculation and by no means proves that there is large-scale collusion in this space, there are already some signs in Bitcoin's price chart that indicate manipulation is taking place. If this is true, the cryptocurrency's decline will quickly reverse once the whales are satisfied with their increased cryptocurrency holdings.

The most likely reason for the recession is simply due to the cyclical nature of the market. Cryptocurrency has seen its share of price fluctuations in its short history. Since Bitcoin’s inception in 2008, there have been approximately four market cycles, each following a similar pattern. Bitcoin starts at a low, quickly rises to a new all-time high, and then crashes back down to near the all-time high of the previous market cycle.

This trend is exactly what we are seeing in the 2021 “bear market”: Bitcoin started the year at around $10,000, rose sharply to $60,000, and is now hovering between $20,000 and $30,000, which is around the same as the all-time high of $20,000 in 2017. A cycle like this usually takes about three years to complete, so if this is the case, Bitcoin may not reach $100,000 until 2023 or later. However, once a pattern can be identified in the market, it is no longer a pattern, because traders once try to take advantage of this "predictable" movement, which will eventually make it unpredictable again.

Even though no one really knows why the cryptocurrency market moves the way it does, the bottom line is that short-term price fluctuations have no impact on the technology, influence, or long-term potential of digital assets. Moreover, every possible reason discussed above has a corresponding solution that will inevitably happen, but all of which will make the entire ecosystem more decentralized, mature, and expand adoption around the world.