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Key points
- Bitcoin down 26% in 2022
- Crypto market faces potential ban in Russia
- What's the likely impact of a Russian ban on Bitcoin?
Bitcoin (CRYPTO: BTC) has been taking a beating in the new year.
Despite a 4% increase since this time yesterday, currently trading for US$36,377, the world's top crypto has lost 26% so far in 2022. And it's now down 47% from its 10 November 2021 all-time highs.
That gives Bitcoin a market cap of US$686 billion, down from almost US$1.3 trillion in November, according to data from CoinMarketCap.
Interest rate and regulatory headwinds
Bitcoin and most every major altcoin have been selling off as crypto investors eye the prospects of interest rates marching higher, faster and more aggressively than most had expected just a few months ago.
Atop the concerns about the rising cost of money, the crypto market is facing new headwinds out of Russia.
Last week, the Central Bank of Russia suggested the government ban the mining and exchange of Bitcoin and every other cryptocurrency within Russia's borders. The bank said Bitcoin and cryptos posed a potential risk to the ruble. It added that trading in cryptos was akin to a pyramid scheme.
With Bitcoin already hammered in the global selloff of risk assets, what could Russia's proposed ban mean?
For some insight into that question, we turn to Simon Peters, market analyst at global crypto platform eToro.
Russia may ban Bitcoin mining
Commenting on Russia's proposed blanket ban on cryptos, Peters said, "Russia imposing a blanket ban on Bitcoin mining may well have an impact on its hashrate and price in the short term. However, I don't believe this will be a long-term headwind."
Peters said Russia's relatively small slice of the Bitcoin mining pie should minimise any major price falls:
Russia is only responsible for approximately 11% of the global hashrate. This is in stark comparison to China, which when it banned bitcoin mining in May 2021, the mining operations based there accounted for 60–70% of the global hashrate of the Bitcoin network.
When these China-based miners went offline due to the ban, the hashrate dropped significantly along with price. But as those miners set up in other countries and jurisdictions the hashrate rebounded and is now at an all-time high.
"If Russia does ban Bitcoin mining," Peters added, "we may well see a similar pattern, but to a far lesser extent."
