Bitcoin has dropped to a six-month low, losing almost a quarter of its value this year as the selloff of riskier assets spread to cryptocurrencies following regulation concerns in the United States and abroad.
Bitcoin’s price plunged below $32,000 Monday morning followed by a modest $4,000 bounceback, but still a massive fall from $69,000 from last November.
Most other digital assets have lost one-quarter to one-third of their value this year, with some analysts predicting that we could be in for more crypto pain going forward
According to CoinMarketCap, the crypto market was valued at $1.5 trillion on Monday, down more than $1.5 trillion below its all-time high of $3 trillion in November.
Last year, bitcoin and other cryptocurrencies witnessed steady value increases thanks to growing acceptance by Wall Street and some of the world’s biggest and most recognizable institutions and companies, including Visa Inc. (NYSE:V), Square Inc. (NYSE:SQ), PayPal Holdings (NASDAQ:PYPL), Tesla Inc.(NASDAQ:TSLA) and quite a few mainstream hedge funds.
Yet, crypto markets have come under pressure recently after it emerged that the Federal Reserve will likely raise interest rates sooner and more frequently than earlier anticipated. It is expected that the Fed will raise interest rates three to four times this year
Also, many prominent investors have shied away from cryptocurrencies as they await more regulatory clarity from US agencies. Many predict that this year will be the one when the crypto market will be regulated.
Bloomberg reported recently that the Biden administration is readying an executive order for cryptocurrencies that could be released as early as next month.
According to the report, the government will task several federal agencies to evaluate cryptocurrency risks and opportunities and set the second half of this year to release the report
The sharp sell-off in digital assets also came following the Russian central bank announcement that it will propose seeking to ban all cryptocurrency trading and mining.
The bank said that cryptocurrency value “is defined primarily by speculative demand for future growth, which creates bubbles,” adding they “also have aspects of financial pyramids, because their price growth is largely supported by demand from new entrants to the market.
Even though the ban would be welcomed by the intelligence community and some political structures in order to block funding for opposition groups and anti-government media, the ban still has no support from the institutions involved in regulating the crypto market.
While the announcement by the Russian Central Bank initially had little impact on bitcoin, it was only the latest announcement by regulators across the globe focused mainly on protecting retail investors. In this case, it was the piling up of bad news and not an isolated incident.
The crypto markets were shocked mid-last year after China started cracking down on the space, curbing bitcoin mining due to concerns of excess speculation and warning financial institutions against offering crypto services.
Earlier this month, the government of Kosovo announced it is banning crypto mining indefinitely to deal with an energy crisis, high prices and blackouts.
In late December, the Islamic Republic of Iran also placed a three-month ban on crypto mining in a bid to avoid winter electricity blackouts.
Earlier this month, violent protests rocked Kazakhstan, which following the China ban became the world’s second-largest crypto mining center. The country’s internet was shut down, essentially bringing mining to a halt.