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Why Dogecoin, Ethereum, and XRP Dropped Today

By Rich Smith – Aug 25, 2021 at 11:22AM

Key Points

  • First, the SEC took aim at fraud in the cryptocurrency market.
  • Then, one federal reserve bank president blasted it as "95% fraud, hype, noise and confusion."
  • Now, President Biden's new treasury secretary may want to sweep all cryptocurrencies away and replace them with a "central bank digital currency."

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First it was the SEC. Now, the U.S. Treasury puts a bullseye on cryptocurrency.

What happened

It's Wednesday, and cryptocurrency prices are fading once more. As of 10:30 a.m. EDT, here's how prices look for several of the biggest names in cryptocurrency:

  • Industry bellwether Bitcoin (BTC -0.78%) is down 0.8% over the last 24 hours, according to data from Coindesk.
  • Ethereum (ETH -1.44%) is off 2.5%.
  • XRP (XRP -1.42%), the token closely associated with Ripple, has fallen 3%.
  • And Dogecoin (DOGE -4.03%) is suffering most of all, declining 4.1%.
Bitcoin symbol pinned to a dartboard

Image source: Getty Images.

So what

Earlier this month, new Securities and Exchange Commission chairman Gary Gensler sparked a minor freakout among cryptocurrency investors when he linked cryptocurrency trading with "fraud" in an interview with Bloomberg, and urged Congress to establish a "robust oversight regime" for the cryptocurrency market. Today, the woman Gensler replaced as head of the SEC -- now-Treasury Secretary Janet Yellen -- was quoted by The Washington Post echoing Gensler's concerns. 

Cryptocurrency "is often [used] for illicit finance," said Yellen, adding that "it's an extremely inefficient way of conducting transactions," a "highly speculative asset" -- oh, and "the amount of energy that's consumed in processing those transactions is staggering," to boot!

To put the icing on the cake, Yellen has also apparently advocated creating a "central bank digital currency" to compete with Bitcoin and other independently developed cryptocurrencies -- an idea China has also floated.

Now what

Add it all up, and the Post observes that a lot of cryptocurrency fans now fear that "Yellen wants to annihilate the industry" -- perhaps to make way for a national digital currency of the government's own making. Personally, I think that sounds a bit ambitious, and I'm not convinced the government could pull it off even if it wanted to. Still, when combined with previous comments from elsewhere in government -- specifically, Minneapolis Federal Reserve Bank president Neel Kashkari's accusation that non-governmental cryptocurrencies are "95% fraud, hype, noise and confusion" -- there's mounting evidence that momentum is building for some serious regulatory efforts to rein in cryptocurrency trading in the U.S.

Until we get a better idea of what, specifically, the government plans to do, I'd buckle up for more volatility in the crypto market in the weeks ahead.

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

Dogecoin Stock Quote
Dogecoin
DOGE
$0.10 (-4.03%) $0.00
Bitcoin Stock Quote
Bitcoin
BTC
$16,838.53 (-0.78%) $-132.04
Ethereum Stock Quote
Ethereum
ETH
$1,233.00 (-1.44%) $-17.98
XRP Stock Quote
XRP
XRP
$0.38 (-1.42%) $0.01

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

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