In the past week, the cryptocurrency market has experienced a lot of turmoil, as prices have continued to crash. Since the start of February this year, Bitcoin hadn’t gone below the $40,000 mark, but this recent crash pushed the pioneer cryptocurrency down as well. While some of people are wondering whether this could be the beginning of the next crypto winter, others are more interested in figuring out the cause of the crash. There are people who have rested the blame at Elon Musk and Tesla’s feet because the crash began as soon as the eccentric billionaire appeared on SNL.
Tesla also announced that they wouldn’t be accepting Bitcoin payments any longer, as the energy-intensive protocol of the coin was damaging the environment. However, two crypto analysts were able to counter both of these claims rather quickly. There is also another theory in the works and this has to do with the Securities and Exchange Commission (SEC) in the US. After all, a warning was recently issued by the SEC that seems to have eliminated any possibility of the United States introducing its own crypto ETF any time soon. As a matter of fact, the SEC warned investors regarding the risks associated with bitcoin futures that are used in mutual funds.
Gary Gensler, the nominee for the position of the new SEC chairman, has also renewed calls of developing a comprehensive regulatory framework for these digital currencies recently. This has only added to the uncertainty and markets definitely don’t respond positively to uncertainty. Moreover, there was also a report claiming that almost 100 enforcement actions had been carried out by the SEC in the crypto sector and they had managed to rake in $1.7 billion in penalties through these actions alone. Even though these actions were taken against fake projects, crypto scammers, and the like, these could still have discouraged institutional investors enough to have the prices dropping.
Lastly, there has also been speculation that, unwittingly or otherwise, the US SEC may actually have the ability to manipulate crypto prices, thereby potentially creating conditions leading to the next crypto winter. As per the report, expert analysis reveals that SEC statements are related to short-term movements in price and the results show that the SEC does have the ability to move the market, depending on the announcement’s nature. Nevertheless, this scenario also doesn’t seem likely because data indicate that crypto bulls didn’t cause the sell-off.
Likewise, institutional investors were not responsible and there wasn’t any single source or even a group of sources that could be identified. Instead, it was likely newcomers to the crypto space who just panicked after a small correction and made it into a massive one through their own actions. Keeping all this in mind, there is a possibility that the price may recover in days, weeks and could lead to an even higher surge, resulting in new all-time highs. But, there is no guarantee of this happening, and investors will have to keep an eye on the market.