Over the past 24 hours, Bitcoin price fell from $8,600 to $7,840, by nearly $800. While trading volumes of most major cryptocurrencies across leading exchanges remain low overall, bitcoin’s daily trading volume has been relatively low, with sell volumes intensifying on exchanges like Bitfinex and Bithumb.
Even though many analysts agree on an optimistic long-term price trend for the cryptocurrency sector, the majority are skeptical towards the short-term momentum of bitcoin, given the 70% correction it has suffered since January.
Notably, as pointed out by a cryptocurrency analyst better known as Wolf of Crypto, it is important to acknowledge that Bitcoin has suffered the third worst crash in its history, behind the 83% crash from $259 to $43 in April 2013, and the 87% crash from $1,163 to $152 throughout late 2013 and 2014.
This nosedive started on Wednesday following a Google announcement that it will be banning cryptocurrency-related ads starting June this year. Another doze of bad news that could have triggered a sell-off could be the International Monetary Fund (IMF) report that urged a global crackdown on the use of digital currencies for money laundering purposes.
The negative media attention did not stop the same day, there was a House Capital Markets, Securities and Investments Subcommittee hearing during which certain Congress members voiced strong antagonism with regards to cryptocurrencies.
The chairman, Bill Huizenga, was quoted as saying, “This panel, this Congress is not going to sit by idly with a lack of protection for investors.”
Brad Sherman, California Rep. went so far as to call cryptocurrencies “a crock” and say that “they allow a few dozen men in my district to sit in their pajamas all day and tell their wives they’re going to be millionaires.”
The reason behind this crash could also have been attributed to a massive sell-off by US investors who have come to the realization that they owe the tax man hefty sums as capital gains from their crypto trading profits.
In a nutshell, anyone who buys and sells bitcoin within a period of one year, the trades are considered as short-term capital gains and therefore attract a tax rate that could go up to 39% on the basis of the trader’s tax bracket, which is a lot!
Bitcoin miners are also not exempt as their earnings are considered as income and the taxation rate again depends on the income bracket.
From here on, if Bitcoin prices fail to sustain above the overhead resistance zone of $7900, the cryptocurrency can easily fall to the February 06 lows of $6,075.04.
Top Stories from the Crypto World
1. Lightning Network goes live on the mainnet
Bitcoin’s highly anticipated Lightning network has finally gone live on the mainnnet. The release marks the latest milestone for LN, which continues to see broad increases in adoption and technical progress.
With backing from computer giant Microsoft as well as some of the Bitcoin industry’s best-known names, it was with little surprise that Lightning Labs also revealed participants in its new funding round included Twitter CEO, Jack Dorsey, Tesla and SpaceX angel investor Bill Lee, Robinhood co-founder Vlad Tenev, and Litecoin creator Charlie Lee, with lnd likewise supporting Litecoin.
Lee had signaled his enthusiasm for LN publicly, releasing a dedicated post of his own about its future in January. Other figures from cryptocurrency, including Blockstream CSO Samson Mow, continue their bullish take on Lightning, Mow this week likening it to a bar tab in a Bitcoin pub on social media.
2. Peter Thiel is long on Bitcoin
Thiel touts the No. 1 cryptocurrency for its size and its ability to compete with gold as a safe haven, saying at the Economic Club of New York:
“I would be long bitcoin, and neutral to skeptical of just about everything else at this point with a few possible exceptions. There will be one online equivalent to gold, and the one you’d bet on would be the biggest,” said Thiel.
But with the exception of a few digital coins, Thiel remains neutral on the rest of the cryptocurrency pack. He didn’t dismiss the possibility that bitcoin could be surpassed by Ethereum or other altcoins that prey on the leading cryptocurrency’s weaknesses, but bitcoin’s strength is in its size.
“I’m not talking about a new payments system. It’s like bars of gold in a vault that never move, and it’s a sort of hedge of sorts against the whole world going falling apart.” he said.
3. Visa CFO loses his shit over Bitcoin
Vasant Prabhu, CFO of card leader Visa, can’t seem to come to terms with Bitcoin. He didn’t hold back his ire for the decentralized network, instead pointing to its appeal for “every crook and dirty politician” not to mention clueless speculators. Visa’s Prabhu has been “shocked” by misguided retail investors who know just enough about bitcoin to be dangerous.
“The people asking me are the ones who scare the hell out of me. You know, guys like the limo driver to the airport . . . They have no idea what they are doing,” Prabhu told the FT.
Mr. Prabhu sees all the makings of a bubble, based on the quick profits that even people close to him are generating, with one relative having doubled their funds with cryptocurrency.
“This is the ultimate thing that you hear about when you have a bubble, when the guy shining your shoes tells you what stock to buy,” said Mr. Prabhu.