What happened
Bitcoin (BTC-USD) and most other cryptocurrencies are under pressure on Tuesday, continuing a multiday downward trend. The leading cryptocurrency lost 14% of its value over the 24-hour period that ended at 3 p.m. EDT, and is trading 23% lower than it was a week ago. Bitcoin is now trading below the key $10,000 level.
As would be expected, bitcoin-linked investments such as the Greyscale Bitcoin Trust(NASDAQOTH: GBTC) were trading lower by similar percentages.
So what
Regulatory uncertainty has been a driving force behind some of bitcoin’s sharpest downward moves, and this time, the murkiness comes from right here in the United States.
In response to Facebook’s (NASDAQ: FB) plans to spearhead the release of the Libra cryptocurrency, several high-profile government officials have spoken out about the dangers of cryptocurrencies.
President Trump recently denigrated them, describing them in a tweet as assets “which are not money, and whose value is highly volatile and based on thin air.” Treasury Secretary Steven Mnuchin, Federal Reserve Chairman Jerome Powell, and a number of lawmkaers have also spoken out about their concerns regarding cryptocurrencies.
Now what
The proximate cause for Tuesday’s drop was likely a Senate hearing about the safety and legitimacy of cryptocurrencies. A particularly troubling point from the standpoint of cryptocurrency investors is that the criticism is bipartisan — it’s not just the Trump administration and congressional Republicans who are concerned about digital currencies.
For example, Sen. Sherrod Brown (D-Ohio) said with regard to Facebook’s Libra plans, “we would be crazy to give them a chance to experiment with people’s bank accounts, to use powerful tools they don’t understand like monetary policy to jeopardize hardworking Americans’ ability to provide for their family.”
It is unclear what if anything will come out of all of the recent hearings and commentary, but one thing is for sure — cryptocurrency investors dislike regulatory uncertainty, and that was reflected in the price declines Tuesday.
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