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Bitcoin was falling Monday as the world’s most popular cryptocurrency struggled to stay above the symbolic mark of $20,000.

‘Full Panic Mode’Bitcoin at last check on June 20 was at $20,385.12, up 4% in the last 24 hours. But it had fallen 23% in the past seven days.

The cryptocurrency on Saturday had dropped as low as $17,592.78, marking the first time it had fallen below $20,000 since December 2020.

“Bitcoin now below 19k, a 72% crash from its all time high in November 2021. 1000s of other shitcoins have lost 99% of their value and disappeared,” Nouriel Roubini, chief economist at Atlas Capital, tweeted. “And even the other Top 10 ‘cryptocurrencies’ have lost 80-90% of their value from their ATH. This Ponzi house of cards is collapsing.”

The fall is being fueled by recession fears, which are pushing investors to liquidate risky assets, such as cryptocurrencies and tech stocks.

“Crypto Twitter is in full panic mode, as even some prominent accounts are calling for BTC to fall as low as $8,000,” said Frank Corva, senior analyst for crypto and blockchain at Finder. 

“Are these accounts being melodramatic? Probably. But so long as the contagion from the Terra (Luna) fallout continues to spread and affect various entities in the crypto space, it’s difficult to tell when the pain will end.”

‘A Difficult Lesson’The cryptocurrency market was rocked last month by the sudden collapse of sister tokens Terra USD, or UST, and Luna.

“It’s difficult for many in the crypto space – especially those who are or were overexposed – to recognize that this great deleveraging moment that crypto is currently experiencing is healthy for the market,” Corva said.

He added that bitcoin was invented as an alternative to the traditional financial system.

“It was created so that people could be their own bank and store wealth outside of the traditional financial system, which many feel is corrupt and rife with moral hazard,” he said. “It wasn’t created so that people could financialize the asset and mimic the same sort of heavily leveraged trading that goes on traditional markets.”

Leverage trading in crypto usually ends badly for traders due to the unpredictable and volatile nature of digital asset prices, he said.

“This is often a difficult lesson for traders to learn,” Corva said.

Turmoil Sparks RegulationMeanwhile, on the regulatory front, the New York State Department of Financial Services recently issued guidance for issuers of U.S. dollar-backed stablecoins.

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“It is the first stablecoin guidance from a state regulator, and its timing was clearly inspired by the recent market turmoil like TerraUSD,” Ma said.

“The agency said it expects stablecoins to be 100% backed by reserves of dollars and four different types of treasuries, have those reserves audited monthly and be redeemable on demand.”

Ma said that the New York State regulation will immediately affect the crypto industry because the state agency currently regulates the issuers of three of the six largest centralized dollar-backed stablecoins in circulation: Paxos’s USDP and BUSD, Gemini’s GUSD, and GMO-Z.com Trust Co.’s smaller USD. 

New York State Leading the Way”Of those, Paxos is the most noteworthy, as Meta  (META) – Get Meta Platforms Inc. Report recently announced that its WhatApp messaging service would use the Pax Dollar as a means of payment,” he said.

New York lawmakers also passed a bill banning certain bitcoin mining operations that run on carbon-based power sources.

“New York State seems to lead the crypto regulations in various fields,” Ma said. 

As far as the federal effort, David Lesperance, managing partner of immigration and tax adviser at Lesperance & Associates,  said that Sens. Cynthia Lummis (R-Wyoming) and Kirsten Gillibrand (D-New York) are trying to build support for their proposed legislation to regulate digital assets.

The Responsible Financial Innovation Act would reduce the Securities and Exchange Commission’s regulation of at least 200 cryptocurrencies and no longer require American citizens to tell the Internal Revenue Service when they have crypto profits of $200 or less.

Industry’s Preferred Regulator”They already seem to have won over the industry by proposing the expansion of the oversight powers of the Commodity Futures Trading Commission – the crypto community’s preferred regulator — and limiting the firms subject to new tax reporting requirements for digital asset brokers,” he said.

Lesperance said that skeptics, including Mark Hays, senior policy analyst for Americans for Financial Reform, call the bill a giveaway.

Hays said in a June 7 statement that “too many lawmakers are rushing to introduce legislation that, in the name of fostering innovation, could legitimize bad actors and bad practices.

“Just because an industry that pumps millions into the political process claims it is innovative does not mean it deserves its own special rule book,” the statement said.

But Perianne Boring, founder and CEO of the Chamber of Digital Commerce, praised the act, saying in a statement that it is “a foundational, comprehensive start to setting a national regulatory framework for digital assets and addresses interagency cooperation, regulatory oversight and the consumer protections necessary for these types of innovative products and services.”