On Friday, Bitcoin and other cryptocurrencies posted sharp losses, on concern that United States President Joe Biden’s intention to increase capital gains taxes will curb investments in digital assets.
On Thursday, news reports said the Joe Biden government plans a raft of proposed changes to the United States tax code, including a plan to almost double taxes on capital gains to 39.6 percent for people earning over 1 million dollars.
The biggest and most popular cryptocurrency, Bitcoin, slumped to $47555, tumbling below the $50000 mark for the first time since early March 2021. It was last down 4 percent at $49667.
According to price and data tracker, CoinGecko, smaller rivals XRP and Ether fell 6.7 percent and 3.5 percent, respectively, while dogecoin, created as a joke for early crypto adopters and which had surged about 8000 percent in 2021 before this latest setback, was down 20 percent at $0.21.
The tax plans shaken markets, prompting investors to book profits in stocks and other risk assets, which have rallied hugely on hopes of a solid economic recovery.
Founder at Bitcoin Center NYC, Nick Spanos, said that with a high growth rate in the bitcoin rate, cryptocurrency holders with increased gains would be subjected to this tax increment. However, he sees bitcoin dropping more in the upcoming days.
On the week, Bitcoin is on track for an 11.3 percent loss, its worst weekly showing since late February. However, during the year, it was still up 72 percent.
But while social media lit up with posts about the plan hurting cryptocurrencies and individual investors complaining about losses, some analysts and traders said declines are likely to be momentary.
CEO at automated crypto trading bot Cryptohopper, Ruud Feltkamp, said that he does not think President Biden’s taxes plans will significantly impact Bitcoin. Moreover, he told Bitcoin has only gone up for a long time, and it’s only natural to observe a consolidation. Furthermore, traders are merely cashing in on winnings.
Moreover, others remained bullish on the long-term prospects of Bitcoin but observed it might take time before values start increasing again.
CEO at Broctagon Fintech Group, Don Guo, said that investors would see the price fall across the cryptocurrency market as an opportunity to widen their portfolio by averaging up their investment outlay and buying new altcoins. Moreover, he said that for Bitcoin, investors would take it as a chance to buy Bitcoin crypto at a lower value.
The shares of cryptocurrency exchange Coinbase were up 0.5 percent at 294.86 dollars in early afternoon United States trading. The public floatation of its shares on 14th April had seen Bitcoin rates rise to $65000 before pulling back 25 percent in the coming days.
Chief market analyst at Markets.com, Neil Wilson, said that the Coinbase listing, the ultimate poacher-turned-gamekeeper moment, might have been the high watermark for Bitcoin.