Bitcoin and other cryptocurrencies are suffering from hefty losses on Friday due to the concern that the U.S. president, Joe Biden, is having a plan to raise the capital gain taxes that are going to curb investments in digital assets. The selloff is coming after reports in which it is said that the Biden administration is planning for a raft of the proposed changes in the U.S. tax code. It is including a plan, which is nearly doubling the taxes on capital gains to 39.6% for all those people who are earning more than $1 million.
Bitcoin is the biggest and the most popular crypto, and it has got slumped by 5% to the $488867 mark, dropping below the $50000 mark for the first time after March. On the other hand, the minute rivals like Ether and XRP have managed to fall down by 7%.
The tax plan is shaking off the markets, which is prompting the investors to book profits in stocks and other risk assets that are rallying massively with the hope of a much solid economic recovery. Levies on the investment gains had been reported to be in line with the increase of the record.
“Bitcoin headed South today after President Biden signaled that he wanted to raise capital gains tax in the U.S.,” said Jeffrey Halley, senior market analyst, Asia Pacific, at OANDA. “Now whether that happens or not, many bitcoin investors are probably sitting on some substantial capital gains if they stayed the course over the past year.”
According to him, he has a firm belief that the developing market with regulation and taxation is remaining as the crypto market’s Achilles Heels. He further added that bitcoin is on track for a 15% loss this week. It is still up by 65% from the start of the year. Ether has dropped by more than 10% on the day, which is as low as $2107 after climbing its record by $2645.97.
However, while social media is lit up with various posts about the plan that is hurting cryptocurrencies, and individual investors are complaining about the losses, some of the traders and analysts say that this decline is temporary.
Others are remaining bullish on bitcoin’s prospects for the long term. However, it is noted that it might take much time for the prices to increase again.
“There are reasons to believe the overall trend will remain bullish unless the price drops below $40k,” said Ulrik Lykke, the executive director at crypto hedge fund ARK36. “At the moment, we are not convinced that the trend will reverse into a bear market but we acknowledge it may take some time before the demand overtakes the supply again in the medium to short term.”
The shares of the cryptocurrency exchange Coinbase have also fallen near 4% to $282 in U.S. pre-market trading. It is marking the lowest level after its listing from earlier this month. This listing is driving the bitcoin price to $65000, which is pulling back by 25% from the following days. Coinbase is listed as the ultimate poacher, which has turned it into its gamekeeper moment. It has the highest watermark for bitcoin, according to Neil Wilson, the chief market analyst from Markets.com.