Here's Why Bitcoin, Ethereum, and Dogecoin Crashed Tuesday

Cryptocurrency prices are plunging.

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share price plummeting down

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

The cryptocurrency market endured a brutal decline on Tuesday, as regulators clamped down on the industry. Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and Dogecoin (CRYPTO: DOGE) were down 7%, 9%, and 20%, respectively, as of 11 a.m. EDT -- and many other cryptoassets were down even more.

So what

Investors are on edge after China cracked down on cryptocurrency miners last week. The Chinese government is reportedly concerned about the mining industry's soaring energy usage, at a time when climate change fears are mounting. The crackdown will result in a greater than 90% reduction in Bitcoin mining capacity in the country, according to the Chinese newspaper Global Times

Many cryptocurrencies saw their prices plunge early on Tuesday.

China also moved to curtail its financial institutions' ability and proclivity to work with crypto-focused companies. The nation's central bank ordered digital payments giant Alipay and several of its largest banks to cease any crypto-related services. 

Now what 

China's recent moves coincide with calls from regulators in the U.S. and other countries for increased scrutiny of the crypto markets. Securities and Exchange Commission (SEC) chair Gary Gensler wants Congress to allow financial watchdogs to directly oversee cryptocurrency exchanges. Sen. Elizabeth Warren has urged regulators to address the industry's negative aspects, including its environmental impact and the sizable losses incurred by many smaller investors. Bank of England Governor Andrew Bailey event went so far as to warn crypto investors to be "prepared to lose all your money." 

There's also rising concern that Tether (CRYPTO: USDT), a stablecoin with a reported market value of more than $62 billion, could also soon be the subject of heightened regulatory scrutiny. Roughly 70% of the cryptocurrency trading volume at exchanges is denominated in Tether, according to some reports. 

Rising regulatory risks are causing investors to reevaluate their outlook for cryptocurrencies like Bitcoin, Ethereum, and Dogecoin -- and many are deciding to sell today.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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