Bitcoin price was ready to turn around, or so many thought. Then India decided to drop a bomb on the cryptocurrency markets. Today, price is down 7.32% on CoinmarketCap and has dipped below the $10,000 mark that many people thought was the point of support.
Earlier this morning, Bitcoin price was down nearly 10% but it has begun pulling out of that nosedive. The price dropped down to just under $9,300 after opening just around $10,200. Today’s price drop is being blamed on the Finance Minister of India.
Finance Minister, Arun Jaitley of India, dropped a statement about blockchain and cryptocurrencies. In a nutshell it says they will do everything they can in order to eliminate illicit use of digital assets. They also do not consider cryptocurrencies to be legal tender and so they should not be part of a payment system.
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It also said that the India government is exploring blockchain use “proactively” in order to help bring on a digital economy.
Hodl A Sec
One Indian wallet company, Unocoin, has come out with what they believe is a clarification of what Jaitley said. They have recently tweeted that this is no change in the government’s interpretation of cryptocurrencies. They even went so far as to call it “business as usual.” Essentially, someone in the know, in the country has said that the message was misinterpreted. They have said that there’s nothing new under the sun in India in terms of cryptocurrency adoption by the government.
The fact that India wants to eliminate illicit use of cryptos is like saying South Korea wants to eliminate illicit use of cryptos, a no brainer. All governments are concerned about cryptocurrencies being used for things like terrorism, drugs, and money laundering. Because that’s the remit of the government, to worry about those things.
Last Year’s News
This is actually old news. In December India already was looking into illegal crypto exchanges and established a regulatory panel to help determine the government’s policies in regards to Bitcoin and others.
So last year’s news sent Bitcoin price down 9%? Possibly. At the very least, it had an impact that helped drive Bitcoin price down.
High Risk, High Reward
This is all part of the high volatility of the crypto market. It is a high risk, high reward situation. Old news can co-mingle with new news and causes a reaction. It’s almost like chemistry. One ounce of bad news plus highly reactive cryptoholders equals a sell off and the Bitcoin price drops. One ounce of good news plus smart cryptoholders equals a bull run and the Bitcoin price reaches $20,000.
Other Bad News
There’s other bad news in the air this week as well. Bitfinex received a subpoena from the US Commodities Futures Trading Commission, and everyone found out Tuesday. Tether, a cryptocurrency that is supposed to be equal to one US dollar, is under scrutiny due to its $1.6B market capitalization. Tether ‘printed’ hundreds of millions of new coins and they were invested, that then sent Bitcoin price up. But the question remains whether or not Tether actually has the actual dollars to back it up. If they do not, it could be disastrous for Bitcoin price. It could be disastrous for all cryptocurrency prices in fact.
An audit was ongoing at Bitfinex but after months of waiting, they terminated the contract with the auditor.
Then there was the Coincheck hack in Japan. They lost $123M in XRP, and another $400M in NEM that were transferred out of the exchange in a single day. Bitfinex was hacked twice, in 2015 and 2016. Tether was also hacked in 2017.
Tether and Bitcoin Price
If an official audit comes out and shows that Tether does hold a number of dollars in its bank accounts equal to the number of Tether on the market, it could show that Bitcoin price is actually lower than it should be and could cause a major spike. If the audit shows that Tether doesn’t have the cash, predictions are a loss of 30-80% of Bitcoin price. At present the amount of Tether in circulation is upwards of $2 billion, including $450 million alone being ‘printed’ in a single week this month.
At present, even if one had invested in Bitcoin back in mid-November, they are still at a positive gain on the investment. If one were to invest in Bitcoin now, they might be able to see a big gain on that in the next couple months. It could be that people who invested in Bitcoin in December are getting skittish and some are selling in order to minimize or prevent losses. We have yet to see where the market is at and if this is a normal part of the technology maturing. The current state is that many are still in a holding pattern on their investment. Eight of the top 100 cryptocurrencies by market capitalization are showing gains this morning.
None of this is financial or investment advice. It’s put forth as informational only. If you are thinking of picking up some Bitcoin now that the price is down, be sure you do research and understand all of your potential risks. Don’t invest what you can’t lose.