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Cryptocurrency Markets Tumble Following India Finance Minister Speech

If you invested in Bitcoin in December, today is going to be a bad day for you. Following an announcement from India's Finance Minister, the cryptocurrency took a hard tumble in the last 24 hours and washed away the recent gains. Bitcoin is currently trading at levels not seen since November, and Ethereum is back to sub-$1,000 prices.

Last year was an incredible year for Bitcoin and other cryptocurrencies, but investors may have gotten carried away during the holiday season. Following a steady climb for most of the year, the price of Bitcoin spiked sharply following Thanksgiving, and it continued to rise until mid-December, when it peaked just shy of $20,000 per coin. Days later the value plummeted to $12,000.

The price of Bitcoin (and all cryptocurrencies for that matter) is extremely volatile, and big swings should be expected. However, if you invested in Bitcoin in December, you may have to sit on your holdings for a while just to break even. In the early hours of February 2, Bitcoin traded for as low as $7,550 (on Coinbase’s GDAX exchange). At time of writing, it’s trading at $8,500, which could be an indication that it will rise again, but that still represents a 57% drop from the peak seven weeks ago.

The value of Bitcoin is also having a severe effect on its market cap. At its peak, Bitcoin commanded more than a quarter trillion dollars in market capacity. Now, it’s barely holding on to $150,000,000.

Bitcoin isn’t the only cryptocurrency that’s taking a beating today, though. Ethereum is also trading at a significant deficit compared to its all time high of $1,425 on January 13. Ethereum appears to be bouncing back (trading currently hangs at around $900), but it too hit a slump early this morning and dipped as low as $730 per coin on GDAX.

According to the charts on Coinmarketcap, which tracks the prices at many exchanges around the world, almost every top-100 coin is down on value. We counted 92 of 100 that were in the red, and of the eight that are on the rise, most of them are barely in the green.

What’s behind the crash?

So, why is this happening? Well, it is likely that the government of India kicked off an inadvertent panic sale. India’s Finance Minister, Arun Jaitley, on Thursday announced that India “does not consider crypto-currencies legal tender or coin and will take all measures to eliminate the use of these cryptoassets in financing illegitimate activities or as part of the payment system.”

Jaitley didn’t say a lot about the India government’s plans for cryptocurrency, which left much for interpretation. Some people think India is preparing to ban cryptocurrencies, and following Jaitley’s speech, several news outlets announced that India would be banning cryptocurrencies and their use in the country. However, the following line in the speech contradicts such a notion.

“The Government will explore use of block chain technology proactively for ushering in digital economy,” said Jaitley.

Unacoin, India’s most prominent Bitcoin company, which provides Bitcoin wallets and currency exchange services, isn’t worried about the announcement. The company interpreted Jaitley’s words as an indication that the government of India hasn’t changed its stance on cryptocurrencies. The company said that “it’s business-as-usual” today at Unicoin.

With the rapid increase in cryptocurrency adaption, regulators are scrambling to figure out how to tax and restrict the use of this new form of asset. In September, the Chinese government introduced new regulations that prompted the country’s largest exchange to shutdown. The closure announcement prompted a panic sale that caused Bitcoin to lose nearly half its value overnight. And just days ago, South Korea introduced new rules for cryptocurrency trading, as reported by CNBC, that would legitimize the practice while removing the anonymous factor of exchanging cryptocurrencies.

Kevin Carbotte is a Contributing Writer for Tom's Hardware US. He writes news and reviews of graphics cards and virtual reality hardware.