Bitcoin Plummets Below $60,000 as US Regulation and China Crackdown Impacts

Bitcoin went below $60,000 for the first price since November 1st, while Ether plunged to its lowest level this month. Bitcoin, which touched a new record high of $69,000 last week, plummeted to as low as $58,600, its lowest in 19 days, and was last down approximately 7% on the day. It is now down 14% from its peak. Ether, the world’s second largest cryptocurrency, has dropped to a 19-day low of $4,109.03 and is currently down roughly 9.7 percent on the day. If the trend continues, it will be the greatest daily drop in both cryptocurrencies since September.

This year, Bitcoin has more than doubled, while Ether has more than sixfold increased. Both touched new highs last week amid a fever for digital assets fueled by speculative demand and contentious claims that they might offset inflation risks. Technical indicators had hinted that the recent strong run in the notoriously volatile market was about to come to an end. Some traders feel that China’s continued restriction on cryptocurrency mining has weighed on the majority of major digital coins. Additional comments from China on bitcoin mining weighed on cryptocurrencies on Tuesday.

The National Development and Reform Commission intends to crack down even more on industrial-scale Bitcoin mining, as well as any involvement by state-owned enterprises. China also stated that it will pursue severe measures against enterprises that break the rules, such as raising power costs. It’s not the first time China has tried to control the bitcoin business.

In June of this year, China instructed banks and other financial institutions to cease supporting transactions and prohibited the mining of currencies. China declared that all cryptocurrency transactions would be outlawed in September. According to data from the University of Cambridge, the Bitcoin network hashrate in Mainland China is China fell to zero in July when miners fled the nation. Prior to then, Mainland China’s portion of the global hashrate had reached as high as 75%.

It is unclear what motivates China’s total ban on cryptocurrencies, but some have speculated that China’s creation of its own Central Bank Digital Currency (CBDC) may be the reason China want to block other cryptocurrency transactions. Some analysts, on the other hand, blamed the drop on new tax-reporting requirements for digital currencies included in the $550 billion infrastructure plan signed into law by President Joe Biden on Monday.

“We’ve seen the United States infrastructure bill signed, which has triggered a selloff from traders worried about regulation and taxation,” said Hayden Hughes, CEO of Alpha Impact, a social trading platform.

President Joe Biden signed the much-debated US infrastructure package into law yesterday evening. New laws for the cryptocurrency industry were included in the legislation, which will increase the reporting obligations for brokers. The new rule requires digital asset transactions worth more than $10,000 to be disclosed to the Internal Revenue Service (IRS).

The transaction’s recipient must verify the sender’s personal details within 15 days of the transaction. The new reporting obligation is set to take effect in 2024. After breaking past $60,000, Bitcoin fell to its 50-day moving average of roughly $58,750 before regaining support and resuming its ascent towards $60,000.

A break below that level brings support near $58,200, the low observed on the 27th and 28th of October. Below that, the $57,800 level, which represents the 61.8 percent fib level from the September low to the November all-time high, could operate as support.

In a tweet, interactive investor Head of Investment Victoria Scholar says, “Bitcoin has broken support around $60k, which might signal to more losses until it can break back over round number barrier.”

“Even though this is shaping up to be the largest one-day sell-off since September, the stock market is only at three-week lows, with a 33 percent decline necessary to reach the September trough.”