Why Bitcoin, Ethereum, and Dogecoin have all fallen this week
Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and Dogecoin (CRYPTO: DOGE) are down 11.69%, 17.41% and 14.65% in the last seven days. They are now trading at $ 41,814.38, $ 2,856.90 and $ 0.2159 per coin, respectively, at 9:54 a.m. EDT. Regulatory crackdowns and a short-lived massive sell-off in the stock market pushed cryptocurrency prices down before recouping most of their losses earlier in the week.
But on September 24, the People’s Bank of China, the country’s central bank, issued a proclamation declaring that all cryptocurrency activity is illegal. The entity specifically called for an outright ban on foreign exchanges operating in China, as well as trading services, crypto brokerage platforms, new token offerings and cryptocurrency derivatives. Earlier this year, China started cracking down on Bitcoin mining, citing energy issues. Over 50% of all global Bitcoin mining activity took place in China around this time, and the measures triggered a 50% cut in Bitcoin and other major cryptocurrencies from May through July.
Chinese investors love Bitcoin, Ethereum, and Dogecoin because these major cryptocurrencies represent the only way for them to transfer their hard-earned wealth abroad, bypassing the country’s strict capital outflow requirements. In fact, Chinese citizens are only allowed to purchase up to $ 50,000 in foreign currency annually from state-affiliated or private banks. Last year, more than $ 50 billion in capital leaked from China-based wallet addresses to other parts of the world.
When investors place orders for millions or even billions of cryptocurrencies, they inevitably increase its price, as supplies are very limited. For example, around 20% of the circulating supply of 18.8 million Bitcoin is already lost due to factors such as human error or loss of wallet keys. The remaining supply is spread over more than 413 exchanges and 70 million wallets around the world. Thus, the loss of buying activity of Chinese investors is a pretty big inhibitor for the appreciation of the price of crypto.
Fortunately, the Chinese government stopped before banning the ownership of cryptocurrencies. So there are a lot of loopholes around the current regulations. Additionally, keep in mind that the cryptocurrency industry is a global market, and countries like the United States, India, Pakistan, Bangladesh, Venezuela, and Nigeria have high rates. adoption of crypto much higher than China. In addition, most of the Chinese miners fled and resettled. Of all the places, they are now comfortably harvesting BTC with their rigs in the Lone Star State while enjoying a warm Texan welcome.
Exciting developments are also happening for these three cryptos. In November, Bitcoin’s Taproot upgrade in November will enable programmable transactions (smart contracts) that automatically run on its blockchain, allowing investors to use their coins to access the vast depth of the decentralized financial sector. The total addressable market for DeFi services has already exceeded $ 167 billion this year.
Speaking of the matter, Ethereum holds the largest market share in the space, fueling tax-efficient non-fungible tokens, crypto borrowing and lending, various methods of earning fixed income, and more. Finally, the Dogecoin network has quickly evolved into the blockchain, where it can satisfy both users and miners. So if anything, it looks more like an opportunity to buy the downside than a time to say goodbye to your holdings.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.