More than $ 200 billion has been wiped from the cryptocurrency market as Bitcoin dipped below $ 50,000 and other digital coins fell due to President Biden’s concerns about imposing capital gains tax will slow investment in digital assets.
The selloff on Friday came after reports that the Biden administration is planning a series of proposed changes to US tax law, including a plan to nearly double taxes on capital gains to 39.6 percent for people making more than $ 1 million.
Bitcoin, the largest and most popular cryptocurrency, fell 5 percent to $ 48,8867 and fell below $ 50,000 for the first time since the beginning of March.
Smaller rivals, including Ether and XRP, were down about 7 percent.
Dogecoin, now the eighth largest cryptocurrency, fell around 19 percent.
The selloff resulted in the wiping out of more than $ 200 billion worth of the cryptocurrency market, according to CoinMarketCap data.
Bitcoin, the largest and most popular cryptocurrency, fell 5 percent to $ 48,8867, below $ 50,000 for the first time since early March.
“Bitcoin went south today after President Biden indicated he wanted to increase the US capital gains tax,” said Jeffrey Halley, senior Asia-Pacific market analyst at OANDA.
Whether that happens or not, many bitcoin investors are likely to be on a sizeable capital gain if they stayed on track for the past year.
‘I firmly believe that developed market regulation and / or taxation remains the’ Achilles heel ‘of the crypto markets.
Bitcoin is on track for a 15 percent loss in the week, although it is still up 65 percent since the start of the year.
Ether fell more than 10 percent in a day to $ 2,107 a day after climbing to a record $ 2,645.97.
While social media scammed with reports of the plan harming cryptocurrencies and individual investors complaining about losses, some traders and analysts said declines are likely to be temporary.
“I don’t think Biden’s tax plans will have a major impact on bitcoin,” said Ruud Feltkamp, CEO at automated crypto trading bot Cryptohopper.
‘Bitcoin has only risen for a long time, it is only natural to see a consolidation. Traders simply cash in on the winnings. ‘
The selloff on Friday came after reports that the Biden administration is planning a series of proposed changes to US tax law, including a plan to nearly double taxes on capital gains to 39.6 percent for people earning more than $ 1 million.
Bitcoin is on track for a 15 percent loss in the week, although it is still up 65 percent since the start of the year
Others also remained optimistic about bitcoin’s long-term outlook, but noted that it may take a while for prices to start to rise again.
“There are reasons to believe that the overall trend will remain bullish unless the price falls below $ 40,000,” said Ulrik Lykke, executive director at crypto hedge fund ARK36.
“At the moment we are not convinced that the trend will reverse in a bear market, but we recognize that it may take some time for demand to catch up with supply in the medium to short term.”
Shares of cryptocurrency exchange Coinbase also fell about 4 percent to $ 282 in US pre-market trading, marking the lowest level since its stock exchange listing earlier this month. The stock exchange listing had pushed bitcoin prices to $ 65,000 before pulling back 25 percent over the following days.
“The Coinbase List – the ultimate poacher and gamekeeper moment – may have been the high watermark for Bitcoin,” said Neil Wilson, chief market analyst at Markets.com.
Biden’s tax plans shocked the markets on Friday, prompting investors to make gains in stocks and other risky assets, which have soared in hopes of a solid economic recovery.
Taxes on investment gains are said to be in line with record increases.
Smaller rivals, including Ether and XRP, were down about 7 percent
Dogecoin, now the eighth largest cryptocurrency, fell around 19 percent
Shares rose during afternoon trading, but the general market is still on track to close the week lower for the first time in five weeks.
The S&P 500 index was up 1 percent from 11:38 a.m. Eastern. The Dow Jones Industrial Average rose 175 points, or 0.5 percent, to 33,991 and the Nasdaq rose 1.3 percent.
Profits were widely shared by each sector in the S&P 500, with banks posting solid profits as bond yields increased, allowing them to charge more lucrative interest on loans. The yield on the 10-year Treasury rose from 1.55 percent at the end of Thursday to 1.57 percent.
Biden’s plan to nearly double taxes on capital gains for an estimated 500,000 top earners is already scorned by some top Republicans who say it will curb investment by removing preferential treatment for investment income.
“It will reduce investment and create unemployment,” said Iowa Senator Chuck Grassley, a senior Republican on the Senate Treasury Committee who helped push Trump’s 2017 tax cuts.
The former Iowa lawmaker pointed to pre-coronavirus economic benefits, adding, “If it ain’t broke, don’t fix it.”
Shares rose during midday trading, but the general market is still on track to end the week lower for the first time in five weeks
The increases would require top earners to pay up to 43.4 percent when an existing investment tax is included.
For those who earn more than $ 1 million a year in high-tax states like New York and California, their aggregate rate can exceed 50 percent.
Biden plans to formally roll out his new plans next week as a way to pay for new investment in education, labor programs, universal pre-K, free tuition for certain income levels, and other programs.
He would also raise the highest income tax rate from the current 37 percent to 39.6 percent, where it was before Trump’s tax cuts.
The rate would apply to those who earn $ 523,601 per year.
In addition to an existing tax on investments introduced as part of Obamacare, certain high-income people would pay federal taxes of up to 43.4 percent.
The move to bring capital gains taxes to the level at which ordinary income is taxed would end a long-standing policy of providing preferential treatment for investment income. The policy is intended to stimulate investment.