The value of Bitcoin fell drastically today, plummeting below $23,000 to its lowest point since December 2020. The drop follows a broader sell-off trend, spurred by inflation, among other factors.
Treasury Secretary Janet Yellen has long been quick to call out the “risks associate with cryptocurrencies,” and it appears those risks have finally come to a head for many investors, according to The Verge. Crypto holders dumped their assets en masse over the weekend, resulting in a market loss of over $200 billion since late last week.
Bitcoin’s recent volatility is tied to predictions that the Federal Reserve will follow suit with the major global banks that have already hiked interest rates significantly on account of inflation. Cryptocurrency lending company Celsius only exacerbated existing concerns Monday when it announced a halt on all withdrawals and transfers “due to extreme market conditions,” according to CNBC.
Based on a 2021 report by digital currency economist Alex de Vries, Bitcoin consumes somewhere between 180 and 200 Terawatt-hours (TWh) of energy per year. That equates to roughly the same amount of electricity used annually by all of the world’s data centers combined.
“We’re getting to price levels where it is becoming more challenging [for miners],” de Vries said. “Where it’s not just limiting their options to grow further, but it’s actually going to be impacting their day-to-day operations.”
While Bitcoin has been decreasing in value for several months, Monday’s 17 percent drop puts it under a vital $25,200 threshold, below which the crypto network will struggle to sustain itself. Miners may either slow or pause operations entirely to avoid spending more money on energy than they can recoup from mining new Bitcoin tokens.