Cryptocurrency markets continued to reel from ongoing volatility in the last 24 hours, as traders cashed out amid fears of a harsh stance by governments and regulatory agencies towards digital currencies. 

Even as the leaders of CFTC and the SEC (which regulate commodities and securities in the United States) prepare to testify before Congress regarding cryptocurrencies – the Bank of International Settlements (BIS), an international financial organization with membership from countries that represent 95% of the world’s GDP – came out against cryptocurrencies this morning.

Agustin Carstens, General Manager for BIS, referred to bitcoin as a “combination of a bubble, a Ponzi scheme, and an environmental disaster” and said there was a “strong case” to regulate virtual currencies. 

Carstens' statement adds to recent reports of China and India considering regulation limiting use of cryptocurrencies. Collectively, these statements have spooked traders. (See also: China To Crack Down On International Crypto Trading.) 

The selloffs intensified this morning as Asian markets came online and the overall market valuation for digital currencies dropped to $276 billion before recovering. At 14:01 UTC, the overall valuation of crypto markets was $335.4 billion, a figure it last touched in December 2017. 

Bitcoin Price Briefly Dropped Below $6,000

Bitcoin’s price reflected turmoil in cryptocurrency markets and fell to as low as $5,922 earlier this morning before recovering. As of this writing, it was trading at $7,131.14, up 3.14% from its price 24 hours ago. 

But the recovery will not last long, if one were to believe well-known economist Nouriel Roubini. He refers to bitcoin as the “mother of all bubbles” and has forecast a further drop to $5,000 levels again today. 

Other cryptocurrencies moved in line with the rest of the market and shed value.

Among the top 10 most-traded cryptocurrencies, Ripple counterpart Stellar was the biggest loser this morning. Bitcoin cash has shed the most value since the start of 2018, as of this writing.

Will Congressional Testimony Change Regulatory Landscape?   

On the radar for cryptocurrency investors today are Congressional testimonies by the leaders of the SEC and CFTC. You can read their testimonies here and here. Briefly, the heads of both agencies are in favor of technological advancements represented by cryptocurrencies. 

But this is not a wide-eyed assessment. They have also drawn attention to the importance of sound legal protection and policy in ensuring crypto progress in their testimonies. 

Read in their current form, the testimonies are along expected lines, and maintain the status quo with respect to virtual currencies. A severe stance would have further spiraled valuations lower as it would have meant the prospect of restrictive regulation in the future. 

At stake in forthcoming regulation is the status of cryptocurrencies and their services. Typical cryptocurrency exchanges are registered as money transmission services within states. But they have to contend with a hodge-podge of different regulations in each state when they set up business. A clear federal directive will help clarify their status and simplify trading processes. In turn, this will help tamp down market volatility as uncertainty is eliminated. 

But that is easier said than done. Because they are digital in nature and traded 24x7 on largely unregulated exchanges, cryptocurrencies are a completely new type of trading and asset class. (See also: Bitcoin Has A Regulation Problem.) 

In an op-ed for American Banker, Peter Van Valkenburg, research director at Coin Center, called for the creation of a “new supervisory regime” seated within the CFTC.

“The public policy goals of state money transmission regulators could be subsumed within a larger, CFTC-administered investor protection regime, and state money transmission laws could be fully preempted for newly CFTC-regulated digital currency exchanges,” Van Valkenburg wrote. 

The creation of a new agency may not make much difference to bitcoin’s price. But the nature and extent of regulation imposed by the new agency will. The threat of regulation in South Korea and China has driven cryptocurrency markets southwards in recent times. 

Correlation Between Cryptocurrency Markets and Stock Market?  

Given the correspondingly precipitous declines in both markets, one may as well ask that question. After all, it could represent a source of future profits for traders.

To date, the stock market and the crypto market have traded independent of each other. The only tenuous link between them may be the Volatility Index, which has racked up gains as impressive as bitcoin. A recent report by Deustche Bank's Global Financial Strategist posited an inverse correlation between bitcoin and VIX. In other words, the higher the VIX, the less volatile bitcoin's price. But recent events may have shot holes into that theory. 

John McAfee Is Still Bullish On Bitcoin Price   

Meanwhile, John McAfee, the anti-virus software pioneer, remains a bitcoin bull, insisting its erratic price swings are normal.

Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin.