Bitcoin ‘s price fell to its lowest level since March on Friday as a combination of factors, including low liquidity and regulatory scrutiny, continue to weigh on the cryptocurrency market .
The Bitcoin price fell to $26,312.23 according to data from the CoinDesk monitoring service , its lowest level since March 17 after holding above $27,000. The Bitcoin sell-off comes amid another broader sell-off of risky assets, as investors become increasingly concerned about rising inflation and the potential for a global recession.
Furthermore, Bitcoin faces a number of headwinds from regulators around the world. In the United States, the Securities and Exchange Commission (SEC) is reportedly investigating several cryptocurrency exchanges, and the Commodity Futures Trading Commission (CFTC) has warned investors about the risks of investing in cryptocurrencies.
Regulatory scrutiny and congestion problems
Scrutiny by US regulators on the cryptocurrency industry has intensified since the collapse of the FTX cryptocurrency exchange last year.
The United States Securities and Exchange Commission warned American cryptocurrency exchange Coinbase in March about potential securities law violations. Coinbase CEO Brian Armstrong said the company is preparing for a lengthy legal battle with the SEC.
Meanwhile, in March, the Commodities and Futures Trading Commission (CFTC) alleged that the Binance cryptocurrency exchange violated trading rules. In its lawsuit, the CFTC notes that the service failed to meet its obligations by failing to properly register as an asset trading platform, which was necessary if it were to open up to US users.
Since 2021, the CFTC has been investigating Binance to determine if it prevented US residents from buying and selling crypto derivatives. Gretchen Lowe, general counsel of the CFTC, has pointed out in a press release that Binance’s actions constitute an intentional evasion of the law.
Why did Bitcoin drop below $27,000?
The combination of several factors has created a challenging environment for Bitcoin and other cryptocurrencies. It remains to be seen if the sell-off will continue or if Bitcoin will be able to recover and resume its uptrend. Among those factors are:
Low liquidity. One of the main reasons for Bitcoin price falling is because there are not enough buyers and sellers in the market to support a higher price. This is partly due to the fact that many investors have withdrawn their money from the cryptocurrency market in recent months.
Regulatory scrutiny. Another factor contributing to the fall in the price of Bitcoin is the work by governments around the world to increasingly investigate cryptocurrencies, and some have already taken steps to regulate them. This is creating uncertainty in the market and making investors more cautious.
Rising inflation. This contributes to the fall in the price of Bitcoin. As the value of fiat currencies declines, investors are looking for assets that hold their value better. Bitcoin is seen by some as a haven against inflation, but its price has also been affected by the rising cost of living.
It is important to note that the Bitcoin price is volatile and can fluctuate widely. It is possible that the price could recover in the future, but it is also possible that it could continue to decline. Investors should carefully consider the risks before investing in Bitcoin or any other cryptocurrency.