Bitcoin Dips Below $20,000 Amidst a Flurry of Worrisome News
Bitcoin has been on a roller coaster ride in recent months, with the cryptocurrency slipping under $20,000 for the first time in nearly two months on March 10. BTC is trading at 19 931,71 $, according to Coingecko, as of the time of this writing. This has been a sharp decline from its record high of over $64,000 in April 2021, indicating a significant downturn for the cryptocurrency market.
Several factors have contributed to the recent decline in Bitcoin's value and the crypto market in general. One of the main drivers has been the announcement by Silvergate Bank, a crypto-friendly bank that services several crypto firms, that it will be winding down operations.
In addition, the recent comments made by Jerome Powell, the United States Federal Reserve's Chairman on March 7th have added to the market's downturn. Powell's pessimistic stance, indicating the possibility of a 50-basis point increase in the following policy rate meeting, has caused uncertainty among investors. The fear of upcoming regulatory policies and interest rate hikes has made investors hesitant to invest in cryptocurrencies.
Furthermore, the Biden administration's proposal to increase the capital gains tax from 20% to almost 40% has also significantly impacted the market. The proposal has raised concerns about the government's increased scrutiny of cryptocurrencies. Another proposal by the Biden administration that has caused turmoil is a potential 30% tax on electricity costs for U.S. crypto miners. This proposal aims to reduce mining activity and severely threaten the crypto industry.
In addition, the U.S. Department of Justice's move of 49,000 bitcoin seized from the darknet marketplace Silk Road to new addresses has been taken with a fearful sentiment. According to data from blockchain security firm PeckShield, the bitcoin was moved in three transactions. Of the total amount, nearly 10,000 bitcoin were sent to wallets controlled by Coinbase, while roughly $41,000 worth of tokens were directed to government-controlled wallets. PeckShield tweeted its findings on a Wednesday morning, and investors quickly noticed. This transfer has raised questions about the potential impact on the market, as the sudden influx of bitcoin could lead to increased selling pressure and drive down the price.
The recent developments have also caused CryptoQuant's Coinbase premium index to decline significantly. This index measures the difference in trading prices between Coinbase and Binance. As negative news piled on, the premium dipped to a two-month low as of March 9.
On top of that, according to Santiment, an on-chain analytics firm, fear, doubt, and uncertainty (FUD) have started to affect the market, increasing the likelihood of price bounces during “this period of disbelief”.
In conclusion, Bitcoin's sharp decline, reaching its lowest value in two months, can be attributed to a combination of factors, including the announcement of Silvergate Bank's voluntary liquidation, regulatory uncertainty, and the upcoming US Federal Reserve rate hike.
The recent decline in Bitcoin's value is a cause for concern, but viewing it in the context of the larger cryptocurrency market is essential. While the recent decline in Bitcoin's value may seem alarming, it is important to note that the cryptocurrency market is known for its volatility. The market has experienced similar downturns, and it has always bounced back eventually. The recent adverse developments in the market highlight the need for regulatory clarity and stability to ensure the continued growth and adoption of cryptocurrencies.