What happened
Cryptocurrency markets appear to be rolling over, with a sea of red overtaking what has seemingly been an “evergreen” sector. Today, Shiba Inu (CRYPTO:SHIB) tokens saw a double-digit decline. That’s certainly not great for a meme token with so much momentum until recently.
However, it should be noted that Shiba Inu is not the only token down today. Far from it. A range of other popular cryptocurrencies such as Monero (CRYPTO:XMR), Fantom (CRYPTO:FTM), and Arweave (CRYPTO:AR) saw double-digit declines as of early afternoon trading.
This sector-specific price action appears to be hitting most tokens indiscriminately today. While there are a few bright spots, it’s mainly a sea of red today.
Image source: Getty Images.
So what
Cryptocurrencies have obviously seen a tremendous amount of capital flow into this sector in recent months. Some experts believe the cooling off we’ve seen in prices today is a natural pullback, following this price action.
However, the key catalyst most point to for today’s decline is yet another round of regulatory crackdowns on the cryptocurrency sector in China. As a global superpower in the cryptocurrency world, what happens in China doesn’t necessarily stay in China. Cryptocurrencies are traded on a global market, and don’t care about global borders.
Early this morning, China’s National Development and Reform Commission stated that energy-related sanctions may be placed on cryptocurrency miners. These could potentially include “punitive” price increases on energy usage, which in many cases is being paid at residential rates, according to Bloomberg.
Now what
More regulation and continued global crackdowns on cryptocurrency miners could negatively affect the network speed and utility created by various blockchain networks. Accordingly, the value of cryptocurrency tokens representing a stake in these networks could see continued pressure.
Right now, crypto investors appear to be weighing whether these headwinds will be short-term in nature, or prolonged. Currently, it appears the jury is out on this front. Accordingly, some investors seem to be willing to wait on the sidelines until the dust settles, and take some profits while doing so.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.