Five Reasons Why Bitcoin (BTC) Plunged Below $20,000

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Alex Dovbnya

A combination of regulatory crackdowns, selloffs in equities, concerns over higher interest rates, and the proposed tax on electricity used in cryptocurrency mining have contributed to Bitcoin’s recent decline below $20,000

Bitcoin has had a difficult week, suffering its worst performance since November. The price of the largest token fell by 2.1% on Friday, plunging below the $20,000 threshold for the first time since January. This came after an 8% on Thursday. 

New York Attorney General Letitia James sued crypto-exchange KuCoin on Thursday for allegedly breaking the law by selling unregistered securities. This lawsuit has implications for the entire crypto market, as it could change the way regulators view cryptocurrencies such as Ether, which has traditionally been treated as a commodity. James is seeking a permanent injunction to stop KuCoin from operating in New York until it complies with the law.

President Biden’s budget proposal includes a phased-in 30% tax on the electricity used in cryptocurrency mining. White House officials claim that the energy-intensive practice is hindering the transition to a low-emission energy future.

The recent selloff in equities, particularly in the financial sector, has hurt investor sentiment. On Thursday, the Dow Jones Industrial Average dove 543.54 points, or 1.66%, to settle at 32,254.86, and both the S&P and Nasdaq are on track for weekly losses of 3% or more.

The crypto market was also hit hard by the collapse of Silvergate Bank, which was the go-to banking institution for crypto firms in the U.S. 

Concerns over higher interest rates have further dampened investor sentiment. Investors are bracing for a key payroll report on Friday, which could shape the direction of interest rates.

At press time, Bitcoin is changing hands at $20,016 on the Bitstamp exchange.