Besides the stock markets, the fear of the US economy moving into recession has paralysed the cryptocurrency markets. Gains from crypto assets are taxed in India but they have not been expressly legalised.
The meltdown in the cryptocurrency markets on August 5 was no less dramatic than the crash in the global equity markets. (Picture Credit: depositphotos)
Apprehensions of the US economy slipping into recession not only pulled down global markets indices deep into the red, but also triggered a meltdown of the cryptocurrency markets as well. In just about 24 hours, more than $1 billion value evaporated from the crypto markets, said experts.
Bitcoin down 11%
Bitcoin (BTC) dived 11% in 24 hours to $54,070 after touching a low of $52,350, said CoinGecko, a digital currency market analyst firm. It marked the lowest level since February.
ETH (or ETHereum) dropped to an 8-month low level of $2,120. According to Bloomberg Bitcoin lost as much as 13.1% in the past one week, which also marked the worst show since the FTX collapse rattled the crypto world in 2022.
Ethereum lowest since mid-Jan
Reporting on the meltdown, Reuters said ETH went down to $2,300 which was the poorest level since mid-January this year. Speculating on the reasons for such a comprehensive meltdown across world equity and cryptocurrency markets, Bloomberg said that apart from overall economic concerns, also lurking was a possibility that the rush to pump in very heavy investments into AI (artificial intelligence) could have also created a bubble that added to the mayhem.
Heavy selloff in Bitcoin ETF
Markets are also nervous since they are eagerly waiting for response of the US Fed in the context of the bigger picture. Bitcoin ETFs (exchange-traded funds) witnessed heavy selloffs – a three-month record – on August 2. Its moving average price has also gone down, said an analyst of IG Australia Pty.
The Indian scene
Some experts have also pointed out that there might be a possibility of sales of Bitcoin by governments and the supply glut contributing to the overall meltdown. These might have been from tokens returned to creditors through bankruptcy proceedings.
There is no ban on cryptocurrency in India. In fact, finance minister Nirmala Sitharaman announced that crypto assets would be taxed (at 30% rate). This tax is applicable on gain made after April 1, 2022. However, there is no official word towards legalising it yet.
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