Power Outage In China's Xinjiang Region May Have Triggered Bitcoin Selloff

As Bitcoin BTC/USD plunged by about 9% of its value over the last 24 hours, experts suggest that news of a power outage in China may be to blame.

What Happened: A blackout in China’s Xinjiang region — where a significant portion of worldwide Bitcoin mining is done — could be among the causes of the selloff, according to Reuters. 

Luke Sully, CEO of the digital asset treasury specialist Ledgermatic, told the news outlet 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 said.

See also: Bitcoin Plunges, Taking Other Cryptocurrencies With It

Computing Power And Network Security: The power outage may have led to fears over the security of the Bitcoin network.

According to a Bitcoin hash rate chart maintained by BitInfoCharts, the computing power behind the network's security saw a sudden decrease from its April 15 value of 157 exahashes per second to just 105 exahashes per second. This translates to a fall of about 33%.

Bitcoin's network hash rate measures the computing power used by miners to secure the network against attacks in exchange for the newly generated Bitcoins and the Bitcoins spent on transaction fees. The higher the hash rate, the more computing power is needed to successfully perform a so-called "51% attack" against the network.

This may have led some people to sell, though doing so probably was unwarranted.

Edan Yago, co-founder at Bitcoin-based decentralized finance project Sovryn, said hash rate fluctuations usually do not have a significant impact on price.

"A hash rate reduction slows transactions, which ironically makes it harder to move coins to exchanges for sale," he told Reuters. "The recent price drop is well within the bounds of typical volatility. It is noise, not signal."

Photo courtesy of Riot Blockchain.