Why Bitcoin, Ethereum and Dogecoin plunged today
The value of cryptocurrencies fell rapidly on Thursday as investors try to decipher what kind of regulations are coming to the industry in the United States. The White House seems ready to push for regulation of the cryptocurrency industry and that uncertainty alone scares investors away.
Starting at 2 p.m. ET, Bitcoin (CRYPTO: BTC) had fallen 6.3% in the past 24 hours, Ethereum (CRYPTO:ETH) was down 6.2%, and Dogecoin (CRYPTO: DOGE) fell 5%. The decline has been fairly steady over the past day and doesn’t seem to be stopping yet.
Current reports indicate that President Biden will issue an executive order next week directing various agencies to study cryptocurrencies and other digital assets. Agencies include the Departments of Treasury, State, Justice, and Homeland Security, with smaller agencies also asked to write technical reports.
One concern is the risk to the financial stability of cryptocurrencies, which have traditionally been much more volatile than currencies or even the stock market. Understanding these risks will be part of the study. The technical aspects could also be important, which could lead to regulations intended to protect people’s digital assets. Given the fraud and hacking that has taken place in cryptocurrencies over the past year, this type of regulation could be welcomed by the industry.
We’ve seen big banks, smaller credit unions, venture capitalists, and publicly traded companies push for Washington, DC regulations to at least set the playing field for the industry. An executive order like this is therefore not surprising, but it is a risk that some investors may not be willing to take at this time. In any market, uncertainty is considered a bad thing, which leads to sales.
It should also be noted that the stock market as a whole is down today and cryptocurrencies generally fall when the market is down. This decision could therefore partly explain why Bitcoin, Ethereum and Dogecoin are down today.
In the long run, it will be a positive thing for cryptocurrencies and the crypto-economy that the regulations are written down. But it’s not entirely clear whether Congress or the current administration is crypto-friendly or not.
Companies and investors have been trying for years to get Congress and regulators to write favorable rules, but they have fought an uphill battle so far. Now that it’s a multi-trillion dollar market, it seems political leaders are starting to take it more seriously.
Although I think in the long term it is good that crypto gets a regulatory framework, I expect there will be ups and downs in the process. Markets don’t like regulation or uncertainty, so while this expected executive order is likely good for cryptocurrencies in the long term, the short-term reaction may still be negative.
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