The cryptocurrency market has recently been shaken by a significant downturn, with Bitcoin experiencing a sharp drop of nearly 4% at one point. According to data from Coinglass, at 1:00 PM Beijing time on October 26, Bitcoin and Ethereum both saw a decline of approximately 1%, while Dogecoin surged to a drop of around 4%. Within the past 24 hours, more than 140,000 traders faced liquidations, contributing to a staggering total of $391 million (approximately 2.78 billion yuan) wiped out from the market. This sharp decline reflects the volatility inherent within the world of cryptocurrencies.

In the derivatives arena, the Chicago Mercantile Exchange (CME) reported that Bitcoin futures had fallen by 2.30% by the end of Thursday’s trading session, leading to a cumulative decrease of 3.09% for the week. Over the last seven days, the spot price of Bitcoin had dropped by a total of 1.87%, while CME Ether futures saw a larger decline of 6.95%.

Meanwhile, related stocks in the United States experienced similar bearish trends; for instance, shares of Marathon Digital Holdings plunged by 7%, while Riot Platforms fell over 5%. This correlation between cryptocurrency prices and related equities signals the intertwined nature of these financial markets, wherein the movement of digital assets can ripple across traditional stock indexes.

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Interestingly, the turmoil in the cryptocurrency space has prompted discussions surrounding regulatory frameworks. Notably, the OEXN platform suggested that Bitcoin’s impact on government fiscal policies is escalating. Given the risks posed by Bitcoin to the sustainability of permanent budget deficits, they advocate for taxation or even a ban on its use. This observation underscores the growing scrutiny that cryptocurrencies face from regulatory bodies worldwide.

In response to the unfolding investigation, Paolo Ardoino, Tether's CEO, took to social media to assert that there is no indication suggesting that Tether is currently under investigation. Nevertheless, Tether has been in the crosshairs of regulators for several years, with investigations tracing back to 2018 when U.S. authorities scrutinized whether Tether had used its USDT stablecoin to artificially inflate Bitcoin prices. The turbulence surrounding Tether's operations raises questions about the stability and integrity of the broader cryptocurrency ecosystem.

Tether, established in 2014, is renowned for creating USDT—the world’s first stablecoin—backed on a 1:1 basis by U.S. dollars. However, its association with various controversies has left many in the cryptocurrency community questioning the sustainability and transparency of such governance structures.

The dynamics of the cryptocurrency mining industry are also evolving. Recent data from Mempool reported a 3.94% increase in Bitcoin mining difficulty, reaching an all-time high of 95.67 trillion hashes as of August 23. Concurrently, the seven-day moving average for Bitcoin's hash rate surged to a historic peak of 723.6 exahashes per second, becoming the first to surpass 700 exahashes per second. Yet, miners are facing significant hurdles—ever since the Bitcoin halving event in April, there has been a notable drop in their income, from approximately 900 Bitcoin mined daily to just around 450. This halving mechanism highlights the deflationary nature of Bitcoin and has far-reaching implications for its mining ecosystem.

Pre-halving prices fluctuated between $60,000 to $65,000 per Bitcoin, resulting in substantial revenue for miners. However, with the reduction in mining rewards, industry experts estimate that miners could lose close to $10 billion in revenue over the year following the halving event if they sell at $60,000. This juxtaposition demonstrates the challenges miners face when navigating market pressures while striving to maintain profitability.

The anticipation surrounding the upcoming U.S. presidential election is palpable, with many industry insiders believing it will significantly impact the cryptocurrency market. Uweb President Yu Jianing, who is also the Co-chairman of the Blockchain Committee of the China Communications Industry Association, indicated that the election environment presents both uncertainty and opportunities for market participants while suggesting that sentiment and clarity in policy will drive minor to medium-term fluctuations in crypto asset prices.

The Federal Reserve's stance on interest rates and monetary policy remains an essential topic, particularly during elections, as these policies are intricately linked to the performance of the cryptocurrency market. Often, lower interest rates and expansive monetary policies attract investors to riskier assets, including cryptocurrencies. If the election results indicate that the new administration might pursue more stimulative monetary policies, it is likely that investment demand for cryptocurrencies will intensify.

Notably, previous U.S. President Donald Trump has expressed enthusiastic support for the cryptocurrency sector, vowing to maintain the current government's Bitcoin holdings and promote the U.S. as a hub for cryptocurrencies. He criticized the Biden administration’s approach to cryptocurrencies, claiming it is fundamentally flawed. This assertion resonates with traders and investors who have classified Bitcoin as a “Trump trade,” capitalizing on favorable market sentiments towards cryptocurrencies associated with his policies.

Elon Musk, CEO of Tesla, solidified his backing for Trump during the election campaign, potentially using his influence to sway crypto market perceptions. His public statements have significantly impacted the prices of Bitcoin, Dogecoin, and other cryptocurrencies, underscoring the tangled web of politics, celebrity influence, and cryptocurrency market dynamics.

On the other hand, Vice President Kamala Harris has also signaled a more balanced approach towards cryptocurrencies, advocating for robust regulatory frameworks to protect investors while promoting innovation. This duality in views among U.S. leaders illustrates the ongoing dialogue surrounding the future of cryptocurrencies while striving for a balance between fostering innovation and ensuring consumer protection.

Gao Zelong, Deputy Director of the Beijing Consensus Blockchain Research Institute and Senior Researcher at the International Blockchain and Cryptocurrency Association, has noted the American political landscape's dynamic shift towards cryptocurrencies—from initial negligence to active discussions and proposed regulatory measures. This evolution indicates a broadening recognition of the importance of digital currencies in modern finance.

Looking ahead, Standard Chartered's Head of Digital Asset Research, Geoff Kendrick, recently opined that Bitcoin might soar to $73,800 before the November presidential elections, translating to a 12% increase from current levels. Such predictions indicate the potential for significant fluctuations in cryptocurrency markets leading to the election, as traders weigh the implications of political leadership on future regulatory landscapes.