Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Bitcoin sinks below $50,000 as cryptos stumble over Biden tax plans

Published 2021-04-23, 12:13 a/m
Updated 2021-04-23, 09:00 a/m
© Reuters. The exchange rates of Bitcoin, Ether, Litecoin and Bitcoin Cash are seen on the display of a cryptocurrency ATM at the headquarters of Swiss Falcon Private Bank in Zurich

© Reuters. The exchange rates of Bitcoin, Ether, Litecoin and Bitcoin Cash are seen on the display of a cryptocurrency ATM at the headquarters of Swiss Falcon Private Bank in Zurich

By Stanley White and Anna Irrera

TOKYO/LONDON (Reuters) - Bitcoin and other cryptocurrencies suffered hefty losses on Friday on concern that U.S. President Joe Biden's plan to raise capital gains taxes will curb investment in digital assets.

The selloff came after reports that the Biden administration is planning a raft of proposed changes to the U.S. tax code, including a plan to nearly double taxes on capital gains to 39.6% for people earning more than $1 million.

Bitcoin, the biggest and most popular cryptocurrency, slumped 5% to $48,8867, falling below the $50,000 mark for the first time since early March, while smaller rivals Ether and XRP fell around 7%.

The tax plans jolted 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 in line for 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 on track for a 15% loss on the week, though it is still up 65% since the start of the year. Ether dropped more than 10% on the day to as low as $2,107, a day after climbing to a record $2,645.97.

But while social media lit up with posts about the plan hurting cryptocurrencies, and individual investors complaining about losses, some traders and analysts said declines are likely to be temporary.

"I don't think Biden's taxes plans will have a big impact on bitcoin," said Ruud Feltkamp, CEO at automated crypto trading bot Cryptohopper. "Bitcoin has only gone up for a long time, it is only natural to see a consolidation. Traders are simply cashing in on winnings."

Others also remained bullish on bitcoin's long term prospects, but noted it might take time before prices start increasing again.

"There are reasons to believe the overall trend will remain bullish unless the price drops below $40k," said Ulrik Lykke, 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."

Shares of cryptocurrency exchange Coinbase also fell around 4% to $282 in U.S. pre-market trading, marking the lowest level since its listing earlier this month. The listing had driven bitcoin prices to $65,000, before pulling back 25% in the following days.

"The Coinbase listing – the ultimate poacher-turned-gamekeeper moment - might have been the high watermark for Bitcoin," said Neil Wilson, chief market analyst at Markets.com.

For a graphic on Crypto tumbles:

© Reuters. The exchange rates of Bitcoin, Ether, Litecoin and Bitcoin Cash are seen on the display of a cryptocurrency ATM at the headquarters of Swiss Falcon Private Bank in Zurich

https://fingfx.thomsonreuters.com/gfx/mkt/qzjvqzmdjpx/bitcoin.PNG

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.