The selloff came after reports that the Biden administration planned a raft of proposed changes to the US tax code.
Cryptocurrencies such as Bitcoin and Ethereum lost a huge amount of their value in today’s trading due to worries that US President Joe Biden’s tax plan will hurt asset investment. Bitcoin, the first and most popular, fell 5 per cent to $48,8867, falling below $50,000 for the first time in more than a month, while smaller rivals Ether and XRP lost around 7 per cent.
Biden administration officials have been reported to be planning a raft of tax code changes, including a plan that nearly doubles taxes on capital gains to 39.6% for people earning more than $1m.
The biggest cryptocurrency by market value, Bitcoin, fell 5% to $48,8867 in the past 24 hours, falling below the $50,000 mark for the first time in over two months.
Rivals Ether and XRP dropped around 7% as well.
Investing in stocks and risk assets, which have rallied on hopes of a strong economic recovery on the back of tax plans, has tinged markets, prompting investors to book profits.
Increases in investment gains taxes were reported to be on the way.
“Bitcoin headed south today after President Biden signalled that he wanted to raise capital gains tax in the US,” said Jeffrey Halley, senior market analyst, Asia Pacific, at OANDA.
He also stated, “Whether that happens or not, many bitcoin investors are probably sitting on some significant capital gains if they stuck with it over the last year”.
“I firmly believe that developed market regulation and/or taxation remain the crypto markets’ Achilles Heel,” he added.
Bitcoin is on track for a 15% loss on the week, though it is still up 65% since the start of the year.
Ether fell more than 10% on the day to as low as $2,107, just a day after reaching a new high of $2,645.97.
Although social media lit up with posts about the plan hurting cryptocurrencies, and individuals complained about losses, some traders and analysts said the declines were temporary.
“I don’t think Biden’s taxes plans will have a big impact on bitcoin,” said Ruud Feltkamp, CEO of automated crypto trading bot Cryptohopper. Another quote by him is: “Bitcoin has only gone up for a long time, it is only natural to see a consolidation. Traders are simply cashing in on winnings.”.
Another analyst noted that bitcoin’s prospects are still bright, but it will take some time before prices start rising again.
Shares of cryptocurrency exchange Coinbase also dropped around 4% to $282 in US pre-market trading, marking the lowest level since its listing earlier this month.
Bitcoin’s market cap had soared to $65,000 before falling 25% a few days later.
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