As tensions between Russia and Ukraine rise, Bitcoin falls below $37,000
As tensions between Russia and Ukraine rise and investors flee riskier assets, bitcoin and other cryptocurrencies have been feeling the heat this week.
According to CoinDesk data, bitcoin was trading at $36,649 at 2:30 a.m. ET on Tuesday, down about 6.5 percent in the previous 24 hours. Over the weekend, the world’s most valuable cryptocurrency slipped below $40,000, and the trend has continued as the Ukraine crisis worsens.
Due to global concerns, the likelihood of interest rate hikes by the US Federal Reserve, and limits on digital assets by certain significant governments, the currency has lost about half of its value since its November peak of $68,990.
Bitcoin’s competitors have also struggled. Ethereum has dropped almost 8% in the previous 24 hours and is now trading at $2,520. Bitcoin, according to experts, is unlikely to stabilize anytime soon.
The worsening Ukraine conflict has alarmed investors throughout the world this week. After recognizing two rebel pro-Moscow territories in eastern Ukraine as independent states on Monday, Russian President Vladimir Putin has ordered Russian soldiers to enter them.
According to almost a dozen US and Western officials, the move to recognize the separatist territory appears to be the first volley in a broader prospective military assault against Ukraine.
Russia’s perplexing crypto policy contributed to the downturn.
On February 21, the country’s finance ministry said it would consider ideas from the country’s central bank on cryptocurrencies as long as they did not contradict its policy, paving the door for laws controlling digital assets.
The finance ministry filed legislative suggestions to the government on February 18 that conflicted with the central bank’s call for a blanket ban, escalating a simmering disagreement over cryptocurrency regulation in Russia.
Due to the threat, digital currencies represent to financial stability, the Bank of Russia has advocated prohibiting cryptocurrency trade and mining. The finance ministry wants legislation that controls cryptocurrencies to be an investment tool but not a payment method.
The draught legislation proposed by the finance ministry intends to establish a legal market for digital currencies.
One proposal requires client identification for transactions involving the purchase or sale of bitcoin, which might jeopardize one of the cryptocurrency’s main selling qualities – anonymity.
Other ideas include requiring international cryptocurrency exchanges to obtain a license in Russia and implementing financial literacy tests to determine how much money individuals are allowed to invest.
According to the finance ministry, citizens who pass the tests will invest up to 600,000 roubles ($7,853) per year in digital currencies. Those that fail would be limited to an annual investment of 50,000 roubles.
The central bank also opposes cryptocurrency mining, in which powerful computers compete to solve complicated mathematical riddles against others connected to a global network. The bank has raised concerns about inefficient energy use and mining’s environmental impact, while the finance ministry prefers to allow mining on a taxation basis.