Cryptocurrency Market in Chaos: Bitcoin Plummets as US Government Cracks Down – Here Are The Reasons

Banking Woes, Proposed Miner Tax, and Tougher Regulations Shake the Foundation of Digital Assets

- Advertisement -

What happened to cause the price of Bitcoin to plummet? A combination of events. One is macroeconomic concerns, which pushed the Nasdaq lower.

And not only that. The divergence between long-term and short-term US Treasury bond yields reached its highest level since 1981, when then Fed chief Paul Volcker faced double-digit inflation.

A sign that scares analysts because whenever it happens, it is a harbinger of a recession. Especially when it’s this big.

BlackRock Raises Its Estimates

In the past few days, BlackRock, the world’s largest asset manager, raised its estimates of the amount of interest rates the Fed will reach to 6%.

As Rick Rieder, head of fixed income, pointed out, the Fed will keep interest rates high for an extended period, causing a slowdown in the economy in order to bring inflation down to the targeted 2%.

The Collapse of Silvergage

Another reason is the collapse of Silvergate one of the two main crypto banks in the US, along with Signature Bank, which offered traditional banking services.

Why are they going into voluntary liquidation? On the one hand, they were shaken after the collapse of the sinful FTX exchange and, on the other hand, because they were targeted by the Justice Department and by senators, accused of having developed a relationship with the equally sinful Sam Bachmann-Freed, the former head of the group.

Investors feared that the bank’s closure, and given its relationship with many crypto companies, would be followed by another domino of bankruptcies.

Apparently this is why Binance founder and CEO Changpeng Zhao was quick to take to Twitter to announce that his company has not suffered any asset losses from Silvergate.

Silicon Valley Bank may be facing a liquidity crisis

However, it seems that banking difficulties do not stop in the relatively small crypto space, but across the entire spectrum of new technology.

Silicon Valley Bank may be facing a liquidity crisis. What is it? An institution that works with startups in Silicon Valley.

In this eventuality many small companies may struggle as the liquidity spigot will close. Among them several in the blockchain space.

30% Electricity Tax on Miners

But there is another issue, perhaps more serious. The concern that the US government is waging a coordinated attack on cryptocurrencies.

Specifically, yesterday a supplemental budget explanatory document was leaked by the NY Times, in which it is revealed that there is a proposal for cryptocurrency miners operating in the US to be subject to a 30% tax on electricity costs.

Which would of course have a direct impact on the industry, which had found extremely hospitable territory in some states such as Texas.

Stricter Cryptocurrency Trading Rules

Another report, this time from the Wall Street Journal, reveals that the Biden administration wants to implement stricter cryptocurrency trading rules, putting an end to a strategy in which a trader could sell and then immediately buy digital assets in order to facilitate both tax and money laundering.

In addition, the Public Company Accounting Oversight Board’s, a body that monitors audits of listed companies, recently issued a warning to investors about proof of reserves (PoR) reports that audit firms publish on behalf of exchanges. From what they say, these reports provide no meaningful assurance to investors or the public as they have not been formally audited.

Here come the Russians again

But we are not finished. We have one last thing. The US Treasury Department has announced that members of the Russian elite, consisting of officials, oligarchs and other entities, have placed several of their funds (estimated at $58 billion) in crypto in an attempt to avoid sanctions against them.

The Special Enforcement Panel set up to enforce sanctions (REPO) asserts their determination to help impose high costs on Russia as long as the Russian war of aggression continues.

Read Next

- Advertisement -
- Advertisement -
- Advertisement -

Latest

- Advertisement -

Must Read

Read Next
Recommended to you