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Why Bitcoin, Ethereum, and Other Cryptocurrencies Are Still Falling

By Rich Smith – Updated Aug 3, 2021 at 2:57PM

Key Points

  • Congress wants to tax cryptocurrency.
  • Now the SEC may want to regulate it.
  • Investors may not love the idea, but regulation might "bring more certainty to" a volatile cryptocurrency market.

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New SEC chairman weighs "robust" regulations on cryptocurrency.

What happened

It's Tuesday, and cryptocurrency prices are still falling.

As of 2:50 p.m. here's how prices look for several of the biggest names in cryptocurrency: 

  • Industry bellwether Bitcoin (BTC 0.68%) is down 4.2% over the last 24 hours, according to data from Coindesk.
  • Dogecoin (DOGE 2.21%) is down a bit more -- 4.9%.
  • XRP (XRP 1.30%) has fallen even more than that -- 5.8%.
  • And Ethereum (ETH 1.11%) is suffering most of all, declining 6.6%.
Round Bitcoin overlaid on a falling stock chart

Image source: Getty Images.

So what

So what's bugging cryptocurrency investors this time? Late last week, if you recall, the U.S. Senate began work on a near-$1 trillion infrastructure bill, and promised to fund it, in part, with a $28 billion tax on cryptocurrency transactions -- and new reporting requirements for "brokers" in the industry to boot.

Today the SEC got in on the act, with new SEC Chairman Gary Gensler giving an interview to Bloomberg, in which he sketched out his thoughts on setting up a "robust oversight regime." 

Those were Bloomberg's words, not his, by the way. In fact, Gensler pronounced himself "neutral," and even "intrigued" by the concept of blockchain technology -- but warned that he is "not neutral about investor protection" and determined to "protect ... investors against fraud."

Gensler reminded Bloomberg that he has specifically asked Congress to pass a law authorizing the SEC to monitor crypto exchanges, and that even without such a law, the SEC has broad powers to take action. He did not, however, lay out a timeline for whatever actions he wants the SEC to take.

Now what

Now what does this mean for investors? Delayed action by the SEC could be bad news -- as well as good.

On the bad side, Gensler apparently declined to comment on whether he plans to approve any of the multiple applications the SEC has received from companies wanting to set up exchange-traded funds for investing in bitcoin. By making it easier to invest in cryptocurrencies, that kind of SEC action would actually be a boon to the crypto market by driving demand, so delay isn't necessarily a good thing.

On the good side, however, Bloomberg cites at least one crypto lawyer pointing out that although cryptocurrency investors don't necessarily love the idea of SEC regulation, setting out clear rules for investing in crypto "would bring more certainty to the industry."

When you consider how volatile cryptocurrency prices have appeared these past few months -- and often volatile to the downside -- a bit of certainty might be just the thing this market needs.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.

Stocks Mentioned

Bitcoin Stock Quote
$17,030.91 (0.68%) $114.89
Dogecoin Stock Quote
$0.10 (2.21%) $0.00
Ethereum Stock Quote
$1,286.23 (1.11%) $14.06
XRP Stock Quote
$0.39 (1.30%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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