- Bitcoin fell 9% towards $US60,000 ($AU81,537), dragging other cryptocurrencies like ether and dogecoin lower.
- US President Joe Biden signed into law a sweeping infrastructure bill that includes tough crypto tax regulations.
- Meanwhile, media reports said China had warned state firms against crypto mining, adding more pressure.
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Bitcoin tumbled towards $US60,000 ($AU81,537) on Tuesday, after being hit by a combination of bearish factors, including the $US1 ($AU1) trillion US infrastructure bill that brings tougher rules on crypto-trading taxes and a new warning to Chinese firms about mining from Beijing.
Bitcoin fell by more than 10% at one point, dropping below $US60,000 ($AU81,537) for the first time since late October. It was last trading at around $US60,604 ($AU82,358), marking a near-8% drop over the last 24 hours by 06:58 am ET.
President Joe Biden’s spending bill is primarily to upgrade America’s public works system. But it also comes with some new rules for crypto brokers, who must now report transactions worth over $US10,000 ($AU13,589) to the tax authorities. Critics have said the term “broker” is too vague and the new regulations might mean other market participants such as miners, traders and node operators may have to comply with them too. Tax increases on digital assets could raise $US28 ($AU38) billion, according to the New York Times.
Sens. Ron Wyden of Oregon, Patrick J. Toomey of Pennsylvania, and Cynthia Lummis of Wyoming had filed an amendment for the term broker, so that it would only apply to people that fit that description in August but it was rejected.
“This legislation is expected to have an indirect impact on the industry, as service providers may begin to charge higher fees to compensate for the taxes levied on them,” Phil Gunwhy, partner at Blockasset.co, an non-fungible token platform, said.
Crypto mining is generally more associated with bitcoin, but a steep slide in the biggest token weighed heavily on smaller rivals. Ether, dogecoin and solana’s sol token all fell between 8.50-9.5% on the day, according to Coinmarketcap.
“Most altcoins have a strong correlation with bitcoin,” Gunwhy said.
China renewed its tough stance on the crypto market with a new warning to state-owned firms to stop mining tokens, as the government seeks to clean up the sector and limit its carbon footprint. CNN reported that Beijing is considering measures such as raising power prices for any institution found to have broken the rules, for example.
Adding to the pressure on the crypto market on Tuesday, was a surprisingly cautious interview from Twitter chief financial officer Neg Segal, who told the Wall Street Journal that investing the social media company’s corporate cash into crypto assets “doesn’t make sense right now” and said volatility was a concern.
Twitter chief executive Jack Dorsey is a known crypto fan and his payments company Square owns digital assets.
Finally, the strength of the dollar undermined the crypto market further, as it hit new 16-month highs against a basket of major currencies.
“This can impact bitcoin because it is a risk-on asset, like stocks and commodities, which tend to fall when the dollar rises,” Marcus Sotiriou, sales trader at GlobalBlock said.
However, Sotiriou said he did not expect bitcoin’s fall to last long.
“Assuming this is not the end of the bull market, it may not be long until this correction is over,” he said.