Cryptocurrency investors have been facing “extreme fear” with the current market as several different currencies are experiencing a “miserable run,” according to Barron’s. The news outlet reported on Nov. 12 that Bitcoin had slumped 22% from its October record high.
So, what has been causing this panic? For one thing, an early November report from Bitget pointed to “shrinking on-chain liquidity.” Think of it like a bank run: nearly $7.94 billion was pulled out of the system between October 27 and November 2. When that much money vanishes, it spooks everyone.
Second, the market is about to be flooded with new supply. Many cryptocurrencies have reserved “tokens” — like digital shares — for traders, including their early investors. According to Bitget, over $310.56 million worth of these tokens were scheduled to “unlock” in the early weeks of November. This can be like a company’s insiders all being allowed to sell their stock on the same day. As blockchain analyst Alex Thorn explained, per Bitget, “When tokens unlock during periods of fear, volatility increases as holders rush to sell before prices fall further.”
While investors are staring at the price, this volatility highlights a different, planet-sized headache: the industry’s environmental footprint. The “proof-of-work” method that Bitcoin runs on has traditionally required a huge amount of electricity, which often came from dirty energy sources. Although there is evidence that Bitcoin is cleaner than it was, crypto still has a large energy-use footprint.
This can have real-world costs. In New York state, for example, environmental groups have called for action, stating that the state’s crypto mining consumes enough electricity for 971,000 homes and is “coming at the expense of regular New Yorkers” by hiking up energy bills.
That energy problem is exactly why a new generation of crypto is moving in a different direction. A cryptocurrency called Celo, for example, uses a “proof-of-stake” method that “requires a tiny fraction of the energy usage” of Bitcoin.
A more balanced approach is gaining traction. Other operations are now powering their facilities with clean energy, and many are funding renewable energy projects. While mainland China has banned crypto mining due to environmental concerns, Hong Kong is positioning itself as a global hub for digital assets, proving that regulation and innovation can coexist.
While there are dark clouds over the market today, the industry’s evolution toward better sustainability is a silver lining that could benefit economic and environmental needs alike.
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