Here’s Why the Crypto Market Corrected this Week
A significant tumble in cryptocurrencies’ prices this week with Bitcoin dipping below the much-revered $60,000 support level, Ether losing nearly 10% of its value landing at $4,200, and hundreds of billions of dollars wiped from the market.
The plunge in prices came after last week’s intense rally which pushed most coins to new all time highs during which we saw Bitcoin break through past the $68,000 level and Ether past $4,400. This drop was the most marked one experienced since September, as global crypto markets had been actively on a healthy upwards trend for over a month now. So the question is: What are the likely catalysts for these dips? China, the U.S. Infrastructure Bill, and a meeting of both countries leaders.
While investors previously worked through previous statements by authorities on enforcement measures, China’s renewed commitment to cracking down on cryptocurrency mining has miners fleeing the country and halting their activities, and onlookers getting jitters of possible bans, both of which ultimately affecting crypto markets negatively. National Development and Reform Commission spokesperson Meng Wei said in a press conference that authorities would be launching a “full-scale” crackdown on crypto mining, calling crypto mining”extremely harmful,” and a threat to the country’s commitment to reducing carbon emissions.
Along with this statement authorities are threatening significant increases in electricity prices for anyone found to be abusing the electric grid for this activity. China is thought to account for more than 75% of global bitcoin mining activity.
An additional contributing factor to market activities are provisions of the U.S.’s $1.3 trillion infrastructure bill. Signed into law earlier this week, the bill contains provisions linked to potential regulation and taxation of cryptocurrencies, which investors at all levels feel is a significant deterrent for further investments in the decentralized space.
Lastly, Biden and Chinese president Xi Jinping held largely positive virtual meetings this week which helped to bolster faith in the U.S. dollar – leading to adverse effects in Crypto investment. As U.S. inflation hit a staggering 5% year-on-year rise this past May, the highest change since 2008, investors have been scrambling for alternative safe-havens including Crypto. The news that the largest foreign debt holder believes the U.S. remains strong, withstanding inflation, is likely the reason large institutional investors began moving away from digital investments.
Despite the fresh legs the Dollar recently got, some experts like “Rich Dad, Poor Dad” author Robert Kiyosaki still insist that US markets are on the verge of a major crash. Be sure to read up on our explainer on how the infrastructure bill is set to improve and grow blockchain technology.
At press time, Bitcoin was trading at around $60,667, up 1% from the day before, while Ether was at $4,244, having dropped another 1%.
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