Bitcoin fell below $20K for the first time since the beginning of the year. At the time of writing, the first cryptocurrency is down, trading at $19,879, which is 8,17% less than it was 24 hours ago. There are plenty of reasons for this drop, and we counted at least four. Let’s look at each one in more detail.
Bitcoin’s free fall
According to CoinMarketCap, signs of an upcoming drop were visible as early as March 7. However, some of the most critical points were seen on March 9, when Bitcoin fell 5,07%, from $22,088 to $20,969, breaking through support at $21.4K. And then dropped another 5,54% to $19.808. In total, BTC lost 10,61% during the day.
- Price $28,084.00
- Market Cap
Many traders predicted this result the day before. One of them is a Trade4ddict trader who noted based on technical analysis that if BTC breaks the support line, we should expect further decline.
On the contrary, the asset had a chance to go higher. As on March 8, Bitcoin was moving inside the price range and support line. However, the miracle did not happen.
$BTC still moving inside price range
We have this bullish hidden divergence with cdv but we need a breakout of range to get bullish
If we breakout of range to the downside and confirm ascending broadening wedge, it continues to look bearish for #BTChttps://t.co/9MbRlYOk8S pic.twitter.com/x3TjJoFMGs
— Trade4ddict (@Trade4ddict) March 8, 2023
Moreover, Bitcoin has pulled almost the entire market. Thus, in the top 100 coins by market capitalization, various altcoins lost up to 20% of their value. Ethereum fell by 9,84% in 24 hours, from $1534 to $1383.
- Price $1,799.19
- Market Cap
Let’s look at the most likely reasons for the market decline.
Doubling the capital gains tax
On March 9, U.S. President Joe Biden proposed doubling the capital gains tax from 20% to 39,6%. The main goal is to reduce the deficit by nearly $3T over the next ten years. Specifically, the announced changes should add about $24B in cryptocurrencies to the budget. The administration of the head of state is allegedly already preparing to publish a budget plan for 2024.
The innovation is expected to affect crypto investors with incomes over $1M.
Biden proposing to double capital gains taxes from 20 to 40% and not allowing for tax loss harvesting on #bitcoin …. WTF… pic.twitter.com/SnJNglpoAA
— Lark Davis (@TheCryptoLark) March 9, 2023
Electricity tax on cryptocurrency mining
An excise tax of 30% on cryptocurrency mining companies is planned to be introduced after December 31, 2023. Thus, the government wants to limit cryptocurrency mining operations in the country to prevent:
- Environmental impacts from mining digital assets.
- Rising electricity prices;
- Possible dangers to local utilities and communities.
In addition to paying the tax, all cryptocurrency miners will have to submit reports indicating the capacity used and money spent.
However, according to Simple Mining, cryptocurrency mining in Iowa is not harmful to the environment, as electricity is produced by natural forces.
Interesting metrics for Iowa electricity.
1) In 2020-2021 wind power generated 58% of Iowa’s electricity; the highest percentage in the United States.
2) Iowa is set to double wind capacity from 10 GW to 20 GW in the next decade.#Bitcoin Mining in Iowa is pic.twitter.com/E1PG4aSwhQ
— Simple Mining (@simpleminingio) March 10, 2023
Do you think miners in such states should pay this kind of tax?
On March 2, it became known that one of the largest US crypto banks had delayed the publication of its annual financial report to the SEC. It didn’t take long for the partners to react, and they immediately started refusing to cooperate with the organization. The bank’s capitalization then plummeted by 48,82%.
The bank had more than 100 exchanges among its clients, and in 2021 Silvergate processed $750B worth of cryptocurrency transactions, so the collapse of such an important institution for the sphere could not help but affect the industry. Experts expect the following consequences:
- Reduced capitalization of the crypto market.
- Difficult access to digital assets.
- Reduced liquidity.
On March 7, it became known that the bank had suspended the cryptocurrency payment network. Therefore, the Silvergate crisis is probably not over yet.
India extends anti-money laundering law to the cryptocurrency sector
All digital assets are subject to this law, the Indian Ministry of Finance announced on March 9. According to the law, exchanges and intermediaries that work with cryptocurrencies will have to report to the authorities about the companies and individuals with whom they interact.
According to blockchain consultant Sindhu Harisakthi, India’s new rules on digital assets are a positive step toward creating a safer and more transparent crypto market.
India’s new regulations are a positive step towards creating a more secure and transparent crypto market. By subjecting cryptocurrency transactions to anti-money laundering laws, the country is demonstrating its commitment to combating financial crimes and protecting its citizens pic.twitter.com/QhoytfbsWu
— Sindhu Harisakthi (@Sindhuhasi) March 10, 2023
Analysts at 5 Minute Crypto noticed that current events are repeating what has happened in 2019. Technical analysis shows that Bitcoin was already in a similar decline, but after similar events, the market went up.
History repeating for $BTC#Bitcoin
Reference : #BearMarket of 2023 and 2019 pic.twitter.com/33T3h6XHMN
— 5 Minute Crypto (@5MCrypto) March 7, 2023
However, if there is no rise in the near future, the asset will look for the next support level. According to experts, it is at levels of between $19.1K and $18.4K.
Expected 20.3k levels to hold well but #BTC had other ideas went below 20K.
The descending wedge is also broken, How ever bought a very small bag here to DCA as it is a buying opportunity.
Our next support areas are 19.1k and 18.4K levels lets see how it goes. pic.twitter.com/f2B5GkP26k
— Elite Crypto (@TheEliteCrypto) March 10, 2023