Cryptocurrency assets like Coin base Global (NASDAQ: COIN) and cryptocurrencies Dogecoin (CRYPTO: DOGE), ether (CRYPTO: ETH), and Bitcoin (CRYPTO: BTC) were down between 3% and 5% this morning but have since made up more than half of the losses.
Sharp moves in the cryptocurrency space are nothing new; However, over the past week there has been a huge divergence between prices and other risk assets like the tech-laden ones Invesco QQQ Trust (NASDAQ: QQQ).
As global stock markets collapsed on Monday, the prices of all cryptocurrency-related assets fell. However, as the markets rebounded on Tuesday, cryptocurrency prices remain under pressure. The underperformance trend has existed since mid-May.
There are no signs that the sale will end anytime soon. The trading volume in Bitcoin on the largest exchanges fell by 40% in June. That said, volume can’t be the main factor. While Bitcoin-related institutional products have seen outflows for nine of the last 10 weeks, the opposite has been the case with Ethereum. And the price is also reduced by more than 50%.
Perhaps the best explanation is China’s ongoing crackdown on cryptocurrency miners. The country is preparing to introduce its own digital currency. In late June, it ordered the cessation of operations in some provinces that were responsible for at least half of the total Bitcoin mining power on earth.
Fed chairman Jerome Powell added salt in the wound, recently saying creating a digital dollar is a high priority. The halfway crystal clear view is that governments are validating the concept and usefulness of cryptocurrency. At the moment the half-empty perspective dominates.
The Securities and Exchange Commission announced today that it has shut down a supposedly cryptocurrency-based Ponzi scheme run by an 86-year-old woman and her 54-year-old son. Such news will certainly not help change the negative mood.
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