The crypto market had another wild trading night as investors and speculators were rattled by a sudden plunge in cryptocurrencies, especially bitcoin.
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The world’s largest digital coin nosedived in freefall to just above $30,000 after yesterday’s what we had called dead cat bounce.
Overnight, China doubled down on its severe crackdown plans to root out cryptocurrency activities, including mining and trading.
The Chinese government has recently boosted its efforts to prevent the use of cryptocurrencies as the latest means by Chinese citizens to move their assets overseas and evade the nation’s strict capital outflow controls amid escalating tensions in US-China relations.
The new government directive orders financial institutions not to conduct crypto-related business, including any other financial services that might use crypto assets.
On Thursday, the US Treasury Department announced it would tighten regulations and control over cryptocurrency markets and cryptocurrency holders. According to the Biden administration’s action plan, any cryptocurrency movement or transfer worth over US $10,000 will be reported by the crypto exchanges and facilitators to the Internal Revenue Service (IRS) for tax and origin-of-money purposes.
In addition, US Federal Reserve chief Jerome Powell warned about potential regulatory framework, saying cryptocurrencies pose risks to financial stability and warrants greater regulation.
The crypto market has already been in rough seas since early this month by President Joe Biden’s proposal to double capital gains tax (CGT) on the highest-income Americans.
You can find here ten significant risk factors here ten significant risk factors, including those belatedly realised by traders amid the current sour mood and negative outlook in the market.
In the past fortnight the market has lost nearly half of its capitalisation, with multiple slumps after near two weeks of what appeared to be a strong bull run.
Lofty valuation in the market, also called bubble has been a problem as also confirmed by the 27-year-old co-creator of ethereum.
In an interview with CNN Business overnight, he said he believed cryptocurrencies are in a bubble and it is “notoriously hard to predict” when it will pop.
“It could have ended already,” Buterin said. “It could end months from now.
“We’ve had at least three of these big crypto bubbles so far. And often enough, the reason the bubbles end up stopping is because some event happens that just makes it clear that the technology isn’t there yet.”
However, with these ups and downs, among the lingering questions is the big one: Is this a hiccup or the start of something worse?