Bitcoin has had a difficult week, suffering its worst performance since November. The price of the largest token fell by 2.1% on Friday, plunging below the $20,000 threshold for the first time since January. This came after an 8% on Thursday.
There are several reasons behind the sharp price drop. Firstly, New York Attorney General Letitia James sued cryptocurrency exchange KuCoin on Thursday for allegedly breaking the law by selling unregistered securities.
This lawsuit has implications for the entire crypto market, as it could change the way regulators view cryptocurrencies such as Ether, which has traditionally been treated as a commodity. James is seeking to prohibit the cryptocurrency exchange from conducting any business activities in New York.
Secondly, President Biden's budget proposal includes a phased-in 30% tax on the electricity used in cryptocurrency mining. White House officials claim that the energy-intensive practice is hindering the transition to a low-emission energy future.The recent selloff in U.S. stocks, particularly in the financial sector, has delivered a blow to investor sentiment. On Thursday, the Dow Jones Industrial Average dove more than 500 points. Other major indexes are also on track to record significant weekly losses.
Thirdly, the crypto industry was also caught off guard by the seemingly sudden collapse of Silvergate Bank, which was the go-to banking institution for crypto firms in the U.S.
Finally, concerns over higher interest rates continue to persist following Federal Chairman Jerome Powell's hawkish comments. Investors are bracing for a key payroll report on Friday, which could shape the direction of interest rates.
At press time, the bellwether cryptocurrency is changing hands at $20,016 on the Bitstamp exchange.