For more crisp and insightful business and economic news, subscribe to The Daily Upside newsletter. It's completely free and we guarantee you'll learn something new every day.
Bitcoin's year has tracked like a pair of tumbling dice in Vegas, dishing out big wins...and big losses. For the second day in a row Tuesday, everything came up snake eyes as the digital currency sank below $30,000 for the first time in nearly a month.
Compounding the pressure on bitcoin and other cryptocurrencies was U.S. Treasury Secretary Janet Yellen, who urged the government to establish a regulatory framework for stablecoins, a fast-growing class of digital currency.
A Sign of Maturity?
While crypto's latest tumble might seem dramatic, it could be a sign the digital currency is starting to perform like most mature assets. After all, the slump is no economic outlier — global stocks have been reeling from a major sell-off, and Monday was the Dow's worst day since October. As for digital coins:
- $89 billion was wiped from the cryptocurrency market on Tuesday, according to CoinMarketCap data.
- Bitcoin was down 6%, Ethereum 7%, and meme-currency dogecoin slipped 7%, according to Coindesk. "There's been a broad sell-off in global markets, risk assets are down across the board," Annabelle Huang of cryptocurrency services firm Amber Group told CNBC.
Yellen Out Loud: Meanwhile, stablecoins — cryptocurrencies pegged to the value of other digital coins, fiat money, or exchange-traded commodities — are causing much consternation in Washington. Nearly half of all bitcoin trading is done using leading stablecoin Tether, and stablecoin operators must hold vast amounts of short-term debt to keep their coins tied to the value of corresponding assets. Ratings agency Fitch warned that rapid liquidations of these reserves could destabilize short-term debt markets, prompting Yellen to call for regulation without delay.
Too Bitcoin To Fail: "If policymakers wait a decade, stablecoin issuers will become the money market funds of the 21st century — too big to fail — and the government will have to step in with a rescue package whenever there's a financial panic," Yale economist Gary Gorton and Fed attorney Jeffery Zhang wrote in a paper this month.