Bitcoin, Ether, and most other top-10 crypto coins have seen selloffs in the last 24 hours with price drops ranging from 7-to-12-percent-plus as a myriad of factors weighs on the market.
Bitcoin was trading almost 8 percent lower in the last 24 hours at $60,667, while Ether saw almost a 9.5 percent loss to $4,284 as of this writing. Also experiencing losses were Binance coin (-9.35 percent), Solana (-8.88 percent), Cardano (-8.1 percent), Polkadot (-12.03 percent) and prominent decentralized finance coins.
Just two of the top 10 coins — both pegged to a matching fiat currency — did not see big losses. Tether was up 0.02 percent and USD Coin was down 0.02 percent in the last 24 hours, as of this writing, according to Investing.com data.
Here are five top factors why crypto is crashing.
President Joe Biden’s new $1 trillion bipartisan infrastructure bill, signed into law Monday, includes a cryptocurrency tax reporting requirement that would require all brokers to report transactions under the current tax code. Crypto industry stakeholders worry that the bill could expand the definition of a broker for Internal Revenue Service purposes. Some say the definition would cast too broad a net and include miners and others who don’t actually facilitate transactions.
Some lawmakers including Sen. Cynthia Lummis (R-Wyo.) introduced a separate bill on Monday to narrow the scope of the law’s crypto broker clause.
Another provision scaring the crypto industry requires transactions of more than $10,000 to be reported to the IRS within 15 days, along with personal information such as the sender’s Social Security number and the nature of the transaction. Some lawyers say it will be almost impossible to comply with the law when applied to cryptocurrencies and other digital assets like non-fungible tokens (NFT), Coindesk reported.
The dollar index, which tracks the currency’s value against major fiat currencies, reached a 16-month high of 95.50 early today on lingering fears that Federal Reserve may raise interest rates sooner than expected to try and keep inflation in check.
“Interest rate hikes are generally bullish for domestic currencies and weigh over perceived inflation hedges like bitcoin and gold,” Omkar Godbole wrote for Coindesk. “Like gold, bitcoin is also priced in U.S. dollars. So, a rising dollar is considered bearish for the cryptocurrency.”
Payments company Square, owned by Twitter CEO Jack Dorsey, bought $170 million worth of bitcoin in the fourth quarter of 2020. Dorsey is a well-known Bitcoin bull.
A bearish comment from Twitter Chief Financial Officer Ned Segal has been credited as a factor in the crashing crypto prices of the last 24 hours. The Wall Street Journal quoted Segal saying that investing cash holdings into crypto assets like bitcoin “doesn’t make sense” right now. Segal cited price volatility and the lack of accounting rules for digital assets as critical factors stopping Twitter from diversifying into cryptocurrencies.
The selling began during early Asia hours after the Wall Street Journal report, according to Coindesk.
“While there was never any expectation of Twitter announcing crypto investments, Segal’s comments likely provided a reason for traders to take some risk off the table in the wake of the rising dollar and controversial crypto tax reporting requirement introduced by the $1 trillion bipartisan infrastructure bill,” Godbole wrote.
Some bitcoin traders and watchers think the No. 1 cryptocurrency was already losing momentum after forming a “double top.” That’s a bearish technical reversal pattern that happens when an asset price hits two consecutive peaks with a modest decline in between and then goes off a cliff after the second peak.
After climbing to a then-record high above $66,000 on Oct. 20, Bitcoin fell to above $58,000. Then Bitcoin’s price set a new record high last week of more than $69,000. Now it’s down to $60,000+. A double top signals a medium or long-term trend change in an asset class, according to Investopedia.
Investor Jeffrey Gundlach is a bitcoin double top proponent. His investment firm DoubleLine Capital LP manages more than $140 billion in assets. In July, his near-term outlook on bitcoin was pessimistic. At that time, Bitcoin was trading around $31,200 and struggling to recover after reaching its mid-April peak of close to $65,000, CNBC reported.
Some crypto analysts say otherwise, like Benjamin Cowen, founder and CEO of Into The Cryptoverse. “I don’t consider it to be a double top,” Cowen said in a strategy session. “What I would say is that we are very likely building out macro-level support. What I mean by that is if we look at, say the weekly time frame, what you’ll notice is that this area here ($60,000) that we previously held as resistance earlier this year… That area that we held as resistance for months is now becoming support. That’s what I see.”
Cowen said he thinks the $60,000 Bitcoin range may end up being the level where the next bear market bottoms out when it comes around.
“I do think there is a decent chance in the future that the current prices could be around the next bear market bottom …. I don’t think Bitcoin is going to $20,000. I don’t think it’s going to $30,000.
China has been moving markets since May by making repeated promises to crack down on crypto mining, crypto transactions and all things crypto. It just made another such announcement at a press conference on Tuesday, promising to launch a “full-scale” clampdown on crypto mining with a focus on commercial mining and the role of state-owned businesses in the industry, CNN reported.
The price of bitcoin fell after the remarks, coinciding with the press conference.
A Chinese government spokeswoman said that crypto production and trade produces “prominent risks,” is “blind and disorderly,” and that mining “consumes lots of energy” and “produces lots of carbon emissions.”
Electrical supply is heavily subsidized in China and the country is experiencing severe electricity shortages, with millions of homes and factories on power rationing.
The country is threatening to raise electricity prices for any institution deemed to be abusing its access to subsidized power by mining crypto. Schools, community centers and other public welfare institutions have traditionally been given lower prices for electricity.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?