Bitcoin falls below $19k level, Ether threatens $1k as crypto liquidity concerns hover

As a prolonged crypto winter continues, Bitcoin and Ether, two of the most prominent global cryptocurrency tokens, saw interim price crashes in the past 24 hours. In the early hours of Friday, Bitcoin (BTC) fell close to $18,700, thereby crashing below the $19,000 price level since December 2020. Ether (ETH) fell below $1,010 in the late hours of Thursday, thereby threatening to fall under the $1,000 price level for the first time since January 2021.

The crypto market’s record low comes after a record streak of surge between late 2020 and 2021 – when in November 2021, the crypto market cap crossed $3 trillion in valuation. At that point, BTC prices had surged by over 3x to reach close to $69,000, while ETH surged by over 4x to reach close to $4,900.

The present prices of the two tokens are thus down by 73% and 79% respectively, from their all-time highs scaled just over seven months ago.

Analysts observing the state of the global crypto market noted that the ongoing price crash has raised the issue of liquidity in the crypto market, thereby bringing the market to a freeze and posing a threat to global crypto exchanges.

In India, along with the ongoing price crash, a 1% tax deducted at source (TDS) charge will be levied further on the margins made by cryptocurrency traders – alongside the 30% income tax that they are already liable to pay on all earnings made from cryptocurrencies. The TDS charge formally came into effect today, July 1.

Last week, in an interview with Mint, Siddharth Sogani, chief executive of crypto market research firm Crebaco Global, had also highlighted the liquidity issue as a key impact of the added TDS burden. He highlighted that while the crypto trading volume in India has already gone down by “close to 90%”, the additional tax will lead to few users potentially wanting to sell their holdings.

The local crypto industry in India saw a massive spike in activity over the past 18 months, in tandem with the wild rise of crypto tokens. However, since then, the government’s statements on controlling the crypto space in the country led to regulatory uncertainty – which the impending cryptocurrency regulation bill is expected to clarify.

However, Sogani added that with no new buyers entering the volatile market right now, and with existing crypto owners holding on to their assets in hope of a market overturn, crypto exchanges may face a difficult stretch to keep themselves afloat.

Crypto exchanges in the country, however, maintained a positive outlook – stating that the levying of the 1% TDS fee would not have a major impact on long term investors, and recovering market prices could also bring back high frequency traders since the taxation levy adds credibility to the sector.