The cryptocurrency Bitcoin aborts its recovery attempt and plunges below the $36,000 mark. Selling pressure is caused by new statements from Beijing on crypto mining.
Renewed selling: the cryptocurrency Bitcoin has aborted its recovery attempt and has once again fallen well below the 40,000 US dollar mark. The world’s most important cyber currency extended its losses most recently, falling below the 36,000 US dollar mark at times by Saturday morning. On Wednesday, Bitcoin had temporarily crashed to 32,000 US dollars on the Bitstamp trading platform, but had then recovered on Thursday. If the psychologically important round mark of 40,000 US dollars is not recaptured over the weekend, a renewed sell-off and the first monthly loss of Bitcoin in more than 2 years threatens.
The renewed selling pressure was caused by news from China on Friday: Beijing will shut down and strictly control the extent of Bitcoin mining as well as all trading activities with the cryptocurrency, the Committee for Financial Stability announced on Friday. The aim is to avert risks in the financial market, it said. Strict measures will be taken in response to illegal, unauthorized mining activities, the committee, led by China’s Vice Premier Liu He, said.
Liu He said the government would crack down on virtual currency mining and trading activities. They also don`t like the use of crypto debit cards. Illegal securities transactions would be stopped and the stability of the stock, bond and foreign exchange markets would be maintained. Liu is the highest-ranking Chinese official to publicly order a crackdown on Bitcoin, and it is the first time the State Council has explicitly targeted the crypto sector. China’s state broadcaster CCTV warned of “systemic risks” of cryptocurrency trading in a commentary on its website on Friday.
Bitcoin had already slumped to a four-month low of $32,000 by midweek because of the harsh tones from Beijing and is now heading for a 24 percent weekly loss. China had banned financial institutions from offering services related to cryptocurrencies. Many of the new regulations expanded previous restrictions and closed loopholes. Since the market is still barely regulated worldwide, investors fear that more countries could follow suit. Bitcoin can be traded around the clock and attracts many private speculators, which encourages large price fluctuations – especially on weekends.
Nearly 10,000 digital assets on the market
The past week was a memorable one for Bitcoin and the other 9900 or so digital assets. On Wednesday, the prices of many cryptocurrencies had crashed like rarely before. Within a few hours, several hundred billion US dollars in market capitalization were wiped out. The record high, reached in mid-April at the IPO of the cryptocurrency Coinbase at just under 65,000 dollars, is out of reach. Ether was last quoted at around 2700 dollars. The record high, also reached only a few weeks ago, is more than 4000 dollars.
China, tax plans and Elon Musk move the market
There are three parties in particular that have moved the crypto market recently: Elon Musk, China and the US government. First, Tesla CEO, multi-billionaire and crypto advocate Musk had the market in a tizzy. First, he revised electric car maker Tesla’s bitcoin-friendly course, then he seemed to hint that it might divest itself of its bitcoin holdings. Musk quickly denied the latter, but the damage was done.
The third drag besides Beijing and Musk’s tweets came from the United States. On Thursday evening, the U.S. Treasury Department announced that, for tax honesty purposes, it was considering a reporting requirement for crypto transactions of more than $10,000. If implemented, the move would be a blow to the anonymity of transactions in their favorite assets, which is so cherished by crypto fans.
NFT fans remain calm
The recent collapse in the price of Bitcoin, Ethereum and other currencies has resulted in heavy book losses for the owners of so-called NFTs. But the fans of these “non-fungible tokens”, a kind of proof of ownership for digital objects, are not letting this upset them. They’re holding on to their collectibles. “People who have spent thousands on NFTs won’t sell them at a 50 percent discount,” says one NFT collector who goes by the pseudonym “Pranksy.” “Many see them as an investment.” That’s comparable to traditional art, whose prices are independent of Wall Street trends, he says. NFTs can be used to mark digital objects such as images, videos or even properties in virtual worlds as originals and turn them into collector’s items. For example, fans can secure video clips of spectacular actions by their sports idols. For artists, this technology, which is based on the blockchain known from cryptocurrencies, opens up new possibilities for marketing their images, videos or music pieces.
Crypto assets burned by more than a trillion dollars
As losses mount in times of rising inflation, bitcoin is also in danger of losing its reputation as a potential inflation hedge. The market value of the currently around 9900 digital assets had collapsed to $1.35 trillion on Wednesday. Just a week ago, a record value of 2.5 trillion dollars had been marked. In other words: Within only one week values of more than one trillion dollar were burned.
In March, tax plans of the USA had already put the cryptocurrency under strong pressure. US President Joe Biden (78) plans to roughly double capital gains taxes. Stockbrokers fear that this will reduce the attractiveness of cryptocurrencies as an investment. In Germany, the taxation of crypto profits is legally controversial. The Federal Ministry of Finance announced to manager magazin that it would soon clarify the matter with the tax offices.