Cryptocurrency prices took a beating on Tuesday, but analysts said the current rough patch can be a buying opportunity.
Bitcoin, the world's largest cryptocurrency, dipped below $60,000 for the first time in two weeks on Tuesday and was down 6.2% to $60,065 at last check.
The price drop was likely sparked by several factors, including China's crackdown on crypto mining, which a government spokesperson called "an extremely harmful" practice that "produces lots of carbon emissions."
The National Development and Reform Commission said it would raise electricity prices for any institution found to be abusing its access to subsidized power to participate in crypto mining, CNN reported.
In addition, Twitter (TWTR) - Get Free Report Chief Financial Officer Ned Segal said investing in cryptocurrencies "doesn't make sense right now," according to the Wall Street Journal, as the company prefers to hold less-volatile assets such as securities.
"The one area of concern is that the move lower has seen Bitcoin fall out of its multi-week ascending channel," he said, "turning the technical outlook from positive to neutral. Interesting area of support around $59,500 – if this holds then we may well see Bitcoin reclaim its recent losses, and look at printing a new all-time high, over the coming weeks."
Micah Carnahan, crypto expert and writer at Finder, said that perhaps the most important news regarding crypto prices concerns language found in the infrastructure bill that President Joe Biden signed into law on Monday.
A portion of the current sell off is likely related to tax implications of the new cryptocurrency reporting requirements, Carnahan said.
"Nevertheless, with the sudden change in prices across the market, many participants are asking if now is a good time to buy the dip," he said.
Carnahan said that while the decision to purchase crypto in the current downturn is a highly personal one, there are at least two good reasons investors may consider buying now.
"If your investment strategy entails dollar cost averaging (dividing your total investment into purchases over time) now may be a good time to stack a few of your favorite tokens," he said.
In such a case, he said, the decision to purchase cryptocurrency was already made, "and the sudden price correction may help stretch your investment."
Second, and perhaps most importantly, Carnahan said, a bipartisan group of senators are already laying the groundwork for changes to the overly broad language found within the infrastructure bill, which includes tax reporting provisions that apply to cryptocurrency.
The senators hope to restrict the interpretation of the entities this legislation targets, protecting American innovation in the space, he said.
"While a timeline has not been set for a vote on the bill, many believe this bipartisan effort has a good chance of passing in the coming weeks or months," Carnahan said.
He added that investing in cryptocurrencies is inherently risky.
"It’s vital for participants to do their due diligence before diving into such a volatile market," he said.