Last week’s Coinbase (NASDAQ:COIN) initial public offering (IPO) saw a number of cryptocurrencies notch new highs including Bitcoin (CCC:BTC-USD), which climbed to $64,829 last week. However numerous cryptocurrencies including Ethereum (CCC:ETH-USD) and Ripple (CCC:XRP-USD) are sinking in trading today, with BTC-USD now trading around $55,682. What gives?
The primary drivers appear to be a largescale blackout in China and fears of further government regulations in both the U.S. and India following Turkey’s cryptocurrency ban last week. Rumors of an Indian ban on cryptocurrencies and the U.S. Treasury charging financial institutions with money laundering for blockchain transactions are largely unsubstantiated, but have remained a concern for crypto investors.
Scheduled blackouts for safety inspections in the Xinjiang region of China led to a significant drop in the bitcoin network’s hash rate (computing power) this weekend. Per Coin Telegraph:
“[Xinjiang] represents nearly 36% of China’s combined hashing power [and roughly] 23.3% of the global hash rate.”
Sunday’s drop in network power saw the “hash rate [plummet] from 172 million terahashes per second to less than roughly 154 million THs,” a decline of more than 10%. Some analysts see this as a primary driver for the decline in BTC-USD, though others disagree.
“Hash rate fluctuations usually do not have a significant impact on price,” per Benzinga.
When it comes to fears of cryptocurrency regulations, there’s a lot less in the way of hard evidence to cite, though broad negative sentiment is perhaps even more harmful for cryptocurrencies than a temporary reduction in hash rate. Yesterday, Bitcoin’s funding rate dropped to its lowest level in seven months, highlighting an increase in the number of short-sellers and indicating a shift in prevailing market sentiment around BTC-USD.
Why Is Crypto Down Today?
Over the weekend, rumors circulated that the U.S. Treasury was set to charge several financial institutions with money laundering using cryptocurrencies. Additionally, Coin Desk reports that a March CNBC report on a possible Indian cryptocurrency ban was reposted and subsequently aggregated as if new by other news outlets over the weekend.
Initial reports on the potential Indian cryptocurrency ban cited a single anonymous government official, but there hasn’t been much movement on that proposed legislation since. Blockchain Association Executive Director Kristin Smith dismissed the rumors of money laundering charges on Monday, telling CNBC those charges would be handled by the Department of Justice, not the Treasury.
Cryptocurrencies from Cardano (CCC:ADA-USD) to Dogecoin (CCC:DOGE-USD) have been on a tear in 2021, yielding outsize profits for investors as blockchain technology becomes increasingly mainstream. Read more of InvestorPlace’s cryptocurrency coverage here.
On the date of publication, Vivian Medithi did not have (either directly or indirectly) any positions in the securities mentioned in this article.