The value of the Bitcoin and cryptocurrency market plunged by nearly $100 billion following a stern warning from the Federal Reserve about the risks of digital currencies. This abrupt price crash comes after Bitcoin’s record-breaking streak of highs.
Fed Chair, Jerome Powell, warned in his latest testimony before Congress that stablecoins and other cryptocurrencies present potential risks to the U.S. financial stability, mentioning particularly that they could contribute to systematic financial risks during periods of stress. This warning is thought to have stirred significant uncertainty and contributed to the downturn in crypto values. Bitcoin, Ethereum, Solana, and Ripple's XRP are among the hardest hit. Ethereum, the second-largest cryptocurrency by market cap, shed almost 10% of its value, while Bitcoin lost over 8%. Smaller cryptocurrencies such as Solana and Ripple's XRP were also hit hard, each losing up to 15% and 12%, respectively. While digital currencies have been rallying over the last year, the sector has faced mounting regulatory concerns. These concerns revolve around protecting investors and preventing the use of cryptos for illegal activities. In the coming weeks, the market will be watching closely to see if the Fed begins taking steps towards tightening cryptocurrency regulations. For now, however, this warning serves as a reminder that volatility remains a significant issue within the cryptocurrency sector.
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