Bitcoin and other cryptocurrencies suffered heavy losses following that U.S. President Joe Biden’s plan to raise capital gains taxes that will curb investment in digital assets.
The selloff was after reports that the Biden administration is planning a set of proposed changes to the U.S. tax code, including a plan to nearly double taxes on capital gains to 39.6 per cent for people earning more than $1 million.
Bitcoin, the biggest and most popular cryptocurrency , plunged five per cent to $48,886, dipping below the $50,000 mark for the first time since early March, while smaller rivals Ether and XRP down around seven per cent.
The tax plans shattered markets, prompting investors to book profits in stocks and other risk assets, which have rallied massively on hopes of a solid economic recovery. Levies on investment gains were reported to be of record increases.
“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. “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.”
“I firmly believe that developed market regulation and/or taxation remain the crypto markets’ Achilles Heel,” he added.
Bitcoin is for a 15 per cent loss on the week, though it is still increase 65 per cent since the start of the year. Ether dropped more than ten per cent on the day to as low as $2,107, a day after increasing to a record $2,645.97. However, social media highlighted with posts about the plan hurting cryptocurrencies, and individual investors lamenting about losses, some traders and analysts said declines are likely to be temporary.
