China’s Mining Ban Focal to Crypto Market 20% Drop in Q2
Compared to Q1 2021, the crypto market experienced a 20% drop in market cap and 33% drop in trading volume in Q2 due to several factors including the nationwide crypto mining ban introduced by China, CoinGecko’s Q2 2021 Cryptocurrency Report shows.
The report, which gives a snapshot of trends and significant moves in the crypto space between April and June, shows it represents a total market cap drop of 41% from its peak to $1.3 tln by the end of Q2.
The drop coincided with Tesla’s announcement to stop accepting Bitcoin payments because of environmental concerns, it states, as Bitcoin’s supposed high energy consumption was featured prominently in many media headlines during the period.
Market waits for Chinese miners to resume
It saw Bitcoin tapered off after hitting its all-time high in April to hit its lowest price in 2021 briefly touching $29,154 on June 22 (a 55% drawdown). Bitcoin ended Q2 at a price of $35,969, a 40% decline in price, and consolidated between the $30,000 to $36,000 range.
The drop in the price, trade volume and market cap of the top cryptocurrency happened as the Bitcoin network hash rate dropped from April’s peak to end of June, the aggregator notes, pointing to China’s mining ban as a major factor at the root of it all.
“Bitcoin’s hash rate dramatically declined by 25%, falling from April’s peak of 166M TH/s to a low of 124M TH/s by the end of June,” it states. “This decline can be linked to the nation-wide banning of Bitcoin mining in China on 21st May 2021. Miners have already begun moving out of China. However, once their operations resume, we can expect the total hash rate to recover.”
Key Q2 2021 crypto market highlights
Meanwhile, despite the overall $2.1 tln volume decline from May to June, the trading volume of most centralized exchanges increased. Their spot trading volume recorded $6.74 tln within the period with Binance being the major contributor to the increase in the quarter’s increase and followed by Huobi (17%), OKEx (13%), and Coinbase (7%). Bitmart is the only exchange that performed poorly when compared to Q1, shrinking by 17% in trading volume. Otherwise, all the other exchanges have grown by at least 22% with FTX leading the pack with a +202% growth though from a smaller base.
Decentralized exchanges recorded higher growth to centralized exchanges (growth rate of 131% vs. 65%) and contributed to 12% of Q2’s total growth. But, in all, the total trading volume of both centralized and decentralized exchanges decreased by nearly 60% in June, ending the quarter at $1.43 tln, a $2.1 trillion drop from May.
Bitcoin’s dominance dropped sharply by 16.3% and went below the 50% mark. On the other hand, the altcoin season was in full swing giving Ethereum the opportunity to get bigger at the expense of Bitcoin during the quarter. The second largest cryptocurrency by market cap grew by 6.7% to a market share of 20% while Dogecoin – thanks to the hype of Meme Coins – replaced Polkadot to grab the sixth place on the list of top 10 crypto ranking.
The top five stablecoins (USDT, USDC, BUSD, DAI and UST) recorded a 76% increase to $105 bln in circulation to add $45 bln to their market cap in Q2. Following the overall stablecoin market rally, though, their volume dropped by 35% to $73.6 bln partly because traders opted for safety during the 20% market downturn.