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Why Bitcoin, Dogecoin, and Ethereum Investors Are Panicking Today

Why Bitcoin, Dogecoin, and Ethereum Investors Are Panicking Today
Written by publisher team

What happened

Cryptocurrencies are under attack again on Friday – in the US and abroad.

In two double-digit reports released this morning, we learned that the IMF is not a fan of cryptocurrency — and that the US Congress is serious about taxing people’s earnings from cryptocurrency investments.

As of 9:45 AM ET, the prices of several of the biggest names in cryptocurrency are dropping:

The round bitcoin symbol appears on the bearish arrow chart

Image source: Getty Images.

so what

On the IMF front, this multinational financial organization argued in a blog post this week that the cryptocurrency is not suitable for use as a “national currency” (a move El Salvador took last month) because “in most cases, the risks and costs outweigh the potential benefits.”

The International Monetary Fund describes cryptocurrencies such as Bitcoin as “too volatile,” not good for people who need “store value,” and “not tied to the real economy,” and argues that the cryptocurrency will not prove popular in “countries with stable inflation and exchange rates, and credible institutions. Moreover, in less secure countries, cryptocurrency as a national currency has the potential to convert “domestic rates … very unstable.”

Of course, the International Monetary Fund also notes that cryptocurrency is often used for “illegal money laundering, terrorist financing, and tax evasion.”

And Congress seems to have taken the hint. As CoinDesk reported last night, a new bipartisan infrastructure bill that just passed a preliminary vote in the Senate yesterday “proposes raising $28 billion from crypto investors” — stealing crypto profits to build bridges and highways in the US as CoinDesk sums up , “Any intermediary that transfers any digital assets will need to file a return” reporting the transaction to the IRS so that the transferor’s earnings can be taxed.

What now

Now what does all this mean for cryptocurrency investors? I actually see both bad and good news in these reports. On the other hand, yes, it appears that the clear trend going forward in the crypto space is for governments and international organizations working with governments to try to establish new reporting requirements, taxes and other regulations for cryptocurrencies, which could reduce their attractiveness to investors. And users alike.

On the else On the one hand, I also suspect Congress might stick its hand in the cookie jar on this. Once Washington becomes convinced that she can profit from taxing others’ crypto profits, she may become addicted to the new revenue stream and fear it will stop. So lawmakers may become more inclined to regulate than ban cryptocurrencies outright.

Call it security thinking, or call it the bright side — either way, I think the net result of these regulatory efforts may be securing a future for cryptocurrency after all.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

About the author

publisher team