India’s ban on the use of cryptocurrencies has jolted markets and provided support to bearish sentiments.
The news instantly wiped off $40 billion from the cryptocurrency market capitalization. The selloff is also blamed on Tether related controversy, a digital coin, which is pledged to be backed by Dollars.
Bitcoin (BTC) started the day trading around $10,200. But the negative comments from the Indian finance minister dragged down the price below $9,400, the lowest level since the start of this year. Excluding Ethereum (ETH), the majority of the top ten cryptocurrencies posted the double-digit decline in Thursday trade.
Why India Plans to Ban Cryptocurrencies?
India, the world’s fastest-growing third world country, looks to discourage corruption and the money laundering through various regulatory actions. They have withdrawn Rs 500 and 1000 notes in 2016 to curb the corruption. However, bitcoin and other cryptocurrencies had provided a room to criminals and money launders to transfer the money wherever they want.
Arun Jaitley, the Indian finance minister, used his budget speech to show concerns about cryptocurrencies and their illegal use.
He said: “The government does not recognize cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these crypto assets in financing illegitimate activities or as part of the payments system”
Indian banks have already frozen anonymous cryptocurrency accounts. Indeed, Arun Jaitley’s comments during his budget speech in parliament, signal that the government will now take strict action against digital currencies.
The Threat of Tether Looms on Cryptocurrencies
The Commodity Futures Trading Commission has started investigating Bitfinex, which was blamed for artificially lifting the price of Tether. Millions-of-dollars worth of new Tether was created in the past few months and used on the Bitfinex exchange. These coins were used to buy Bitcoin and other digital currencies, creating an artificial volume and price growth.
Is it the Bottom of Crash?
Analysts warned investors that the Tether related controversy could create a huge crash in cryptocurrency prices, and that threat has been sharply impacting trader’s sentiments over the last couple of sessions. Bitcoin price currently hovers just above the $9,000 level but, the market pundits expect the price to dip significantly if Tether and Bitfinex are found guilty of making false claims. After India’s ruling, the U.K. Prime Minister, Theresa May also promised to roll out strict regulatory requirements for digital currencies. As a result, it’s difficult to predict where digital currencies will be in the next few days, let alone months.
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