Bitcoin’s year has tracked like a pair of tumbling dice in Vegas, dishing out big wins…and big losses. For the second day in a row Tuesday, everything came up snake eyes as the digital currency sank below $30,000 for the first time in nearly a month.
Compounding the pressure on bitcoin and other cryptocurrencies was U.S. Treasury Secretary Janet Yellen, who urged the government to establish a regulatory framework for stablecoins, a fast-growing class of digital currency.
A Sign of Maturity?
While crypto’s latest tumble might seem dramatic, it could be a sign the digital currency is starting to perform like most mature assets. After all, the slump is no economic outlier — global stocks have been reeling from a major sell-off, and Monday was the Dow’s worst day since October. As for digital coins:
- $89 billion was wiped from the cryptocurrency market on Tuesday, according to CoinMarketCap data.
- Bitcoin was down 6%, Ethereum 7%, and meme-currency dogecoin slipped 7%, according to Coindesk. “There’s been a broad sell-off in global markets, risk assets are down across the board,” Annabelle Huang of cryptocurrency services firm Amber Group told CNBC.
Yellen Out Loud: Meanwhile, stablecoins — cryptocurrencies pegged to the value of other digital coins, fiat money, or exchange-traded commodities — are causing much consternation in Washington. Nearly half of all bitcoin trading is done using leading stablecoin Tether, and stablecoin operators must hold vast amounts of short-term debt to keep their coins tied to the value of corresponding assets. Ratings agency Fitch warned that rapid liquidations of these reserves could destabilize short-term debt markets, prompting Yellen to call for regulation without delay.
Too Bitcoin To Fail: “If policymakers wait a decade, stablecoin issuers will become the money market funds of the 21st century — too big to fail — and the government will have to step in with a rescue package whenever there’s a financial panic,” Yale economist Gary Gorton and Fed attorney Jeffery Zhang wrote in a paper this month.