By Samuel Indyk
Investing.com – The price of briefly plunged below $48,000 early on Friday morning in a broad-based cryptocurrency sell-off. Over the last 24 hours, the global cryptocurrency market-cap has fallen 12.3% to $1.75tln.
There does not appear to be a single catalyst for the move lower in the cryptocurrency but rather a few stories that have grabbed attention.
Yesterday, reports that US President Biden is considering a hike in tax. This triggered a fall in US stocks, particularly the tech-heavy and has had a knock-on effect on other riskier assets, such as cryptocurrencies.
“It is clear that Bitcoin is more sensitive to capital gains tax threats than most ‘asset’ classes,” said Jeffrey Halley, Senior Market Analyst at OANDA in an emailed note. “The threat of regulation, either directly in developed markets or indirectly via the taxman, has always been crypto’s Achilles’s heel, in my opinion.”
Further regulation in the sector is another driver for the downside. The Turkish Central Bank recently announced they were to ban payments in cryptocurrencies, while India has also previously introduced a cryptocurrency ban. There have been various warnings that further regulation on cryptocurrencies may be forthcoming, including from the CEO of crypto exchange Kraken Jesse Powell, who recently warned that there could “be some crackdown” on cryptocurrencies.
Others have pointed to the sudden blackout and disappearance of the CEO of . Around 400,000 users have been locked from their accounts with no access to their assets and funds. Although the news would not have a fundamental impact on the price of cryptocurrencies, it continues to paint a negative picture and investors may fear that lax regulations in the sector may see this become a more common occurrence.
After a 15% flash crash from record highs last weekend, Bitcoin had failed to gain momentum to push back higher throughout the week. Earlier this week, analysts at JPMorgan (NYSE:) warned that if Bitcoin did not reclaim $60,000, momentum signals will decline.
Despite the decline seen in the latest week, Bitcoin is still higher by around 65% and has gained over 500% in the last 12 months amid support from corporations and institutional investors. Tesla has announced they had bought Bitcoin to diversify reserves while numerous financial services companies have announced forays into the digital asset space in recent months.
Bank of New York Mellon (NYSE:), Visa (NYSE:) and Mastercard (NYSE:) have announced plans to offer cryptocurrency services, while newer companies in the space, such as Square (NYSE:), have also bought Bitcoin for their balance sheet.
At 10:05BST, Bitcoin was trading around $48,500, was lower at around $2,200 and was trading near $0.24 per coin.
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