On Tuesday, Bitcoin and other cryptocurrencies plummeted from relatively close record highs.
The world’s largest virtual coin, Bitcoin, momentarily dipped below $60,000, falling as low as $58,702 at a stage. However, its year-to-date returns are still up almost 110 percent.
Moreover, the second-largest cryptocurrency, Ether, dropped 5.2 percent to $4,325.18.
The reason for the price movement was unclear.
During a news conference on Tuesday, the state planner of China, the National Development and Reform Commission (NDRC), stated that it is going to carry on cleaning up virtual currency mining within the country.
According to the National Development and Reform Commission, China’s electricity usage increased by 12.2 percent from January to October and 6.1 percent year-over-year in October alone.
A translation of Meng Wei’s (NDRC spokesperson) Mandarin comments on Tuesday are that mining “causes large energy consumption and carbon emission. It has no active impact to lead industry development or scientific progress.”
Furthermore, Wei also stated: “Regulating cryptocurrency mining activities has significant meaning in optimizing our industrial structure, saving energy and cutting emission, achieving carbon emission and neutrality goals.”
According to other sources at the time, the People’s Bank of China planned to bar foreign exchanges from offering services to Chinese customers, as well as financial corporations and other foreign firms from enabling transactions where crypto trading would otherwise be permitted.
Last year, Chinese President Xi Jinping stated that China aspires to be carbon neutral by 2060.
The NDRC has stated that it is going to concentrate on state-owned enterprises that are involved in Bitcoin mining. It also stated that it is considering levying “punitive electricity prices” on those who engage in mining cryptocurrencies while paying a residential electricity rate.
Since the earlier months of 2021, China’s authorities have been working on eradicating Bitcoin mining in the country.
Even if the comments aren’t very fresh, negative cryptocurrency-related statements from Chinese officials have often resulted in a sell-off in digital currency.
Furthermore, the recently agreed infrastructure package in the US is going to boost tax enforcement on digital currencies.
One component of the bill mandates that brokers file 1099 forms with the IRS for digital asset transactions, such as Ether or Bitcoin. Users’ names and addresses also have to be disclosed by brokers.
Exempting decentralized stock exchanges or crypto miners from reporting obligations, proponents of the bill believe, might establish a “two-tiered cryptocurrency market” and promote an “unregulated shadow financial market.”
The Joint Committee on Taxation, which is nonpartisan, predicted that the program would raise $28 billion in additional revenue over the following decade.
Crypto proponents and other critics, on the other hand, have complained that the bill’s definition of who classifies as a “broker” is too vague, claiming that the term could potentially target people without customers who might not have access to the information required for compliance.
In response to these concerns, the US Treasury Department announced in August that it is not going to pursue non-brokers, including miners, hardware developers, etc.
Another clause mandates firms and exchanges to declare any crypto transactions worth more than $10,000.
Because the rules aren’t set to take effect until January 2024, crypto lobbyists are expected to pursue other legislative options to weaken the law.
The money raised from the stiffer regulations is going to go toward nearly $550 billion in new spending for bridges, roads, rail, water, transit, and other “conventional” infrastructure investments over the next decade.
Repurposing unspent Covid-19 relief funds, as well as recouping fraudulently compensated unemployment funds, unemployment money refunded by states that hastily ended a federal $300-a-week benefit, targeted business users’ fees, and economic growth generated by the investments are all included under the items to be paid for in this infrastructure bill.
Price Drops After Near-record Highs
Crypto prices are also falling after many of them set all-time highs in November.
On November 10, Bitcoin hit a new high of $68,990.90, and Ether followed suit on November 11.
Therefore, despite the fact that the specific reason for the drop in Ether and Bitcoin is unclear, this move did coincide with China’s state planner’s press conference, the National Development and Reform Commission. The drop also occurred one day after President Joe Biden signed a $1.2 trillion infrastructure bill into state law.