- Bitcoin dipped below $59,000, while ether headed towards $4,000, as investors sold crypto for a second day.
- The selloff has been fueled by China's warning to state firms mining crypto, as well as the new US infrastructure bill.
- Polkadot and solana have also fallen in the last week, along with meme token shiba inu and others.
- Sign up here for our daily newsletter, 10 Things Before the Opening Bell.
Cryptocurrencies came under fire for a second day on Wednesday, as investors cashed in on recent record highs in the likes of bitcoin, ether and shiba inu, wiping more than $300 billion off the size of the total market in the space of a week.
Bitcoin has lost about 8% in two days and was last trading at $60,970, unchanged over the last 24 hours by 07:25 a.m. ET, having hit an earlier low of $58,994, according to Coingecko. Ether, meanwhile, has fallen 10.5% in two days and was last down 1% on the day around $4,265, having dropped to as little as $4,109.
Both tokens have hit record highs this month, which has encouraged some investors to take profit, particularly in light of a number of more bearish developments in the last week. This most recent selloff has cut around $340 billion from the total market value, which hit almost $3 trillion exactly a week ago.
The Securities and Exchange Commission rejected an application from VanEck for a spot bitcoin exchange-traded fund. The fund's bitcoin futures ETF met with lukewarm reception when it launched on Tuesday, in sharp contrast to the blockbuster market debut from rival ProShares' ETF in late October.
Furthermore, President Joe Biden's $1 trillion infrastructure bill that was signed into law this week contained specifics on how crypto transactions above a certain size would have to be reported to the Internal Revenue Service, but offered little clarity about who would be liable to pay the ensuing taxes.
"The IRS might well push back and say that this is not enforceable," James Butterfill, an investment strategist at CoinShares, said, adding that the IRS would have to determine not just the rate at which crypto brokers were taxed, but also how widely it would apply.
"What happens if there is some kid in the background who is mining - how do you identify that individual?" he said.
China issued another warning to state firms on Tuesday to stop all crypto mining activity, as it seeks to tighten its grip on digital assets as part of its clampdown on the technology sector.
The news initially added to the pressure on the crypto market, but analysts said this factor would likely prove temporary, given that very little crypto mining takes place in China at all after repeated government crackdowns this year.
Twitter chief financial officer Ned Segal told the Wall Street Journal this week that it didn't make much sense to use the social media's corporate cash to buy crypto right now given its volatility.
The smaller altcoins have also succumbed to profit-taking this week and eased again on Wednesday. In the last week, polkadot's dot has fallen by 17%, while solana's sol has shed 7.5% in value, and shiba inu has lost almost 10%.
Despite the recent decline, analysts were still optimistic about the market outlook.
"There remain multiple technical indicators that suggest this is not the end of the current bull market and so this continued correction might not last long," Freddie Evans, sales trader at digital asset broker GlobalBlock, said in a note on Wednesday.