Bitcoin and other cryptocurrencies tumbled on Friday due to concern that US President Joe Biden’s plan to raise tax for the rich would curb investments in digital assets. Bitcoin, the most popular currency fell below USD 50,000 mark for the first time since March and slumped to USD 47,555.
News reports on Thursday said 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.
Other cryptocurrencies felt the heat of the negative sentiment too. Ether and XRP fell 3.5 per cent and 6.7 per cent respectively. while dogecoin, created as a joke for early crypto adopters and which had surged about 8,000% this year prior to this latest setback, was down 20% at $0.21, according to price and data tracker CoinGecko.
“With a high growth rate in the bitcoin price, crypto holders that have accrued gains will be subjected to this tax increment,” said Nick Spanos, founder at Bitcoin Center NYC. He sees bitcoin dropping further in the coming days.
Bitcoin is on track for an 11.3% loss on the week, its worst weekly showing since late February. On the year, however, it was still up 72%.
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.
“Investors will see the price drop across the crypto market as an opportunity to widen their portfolio by averaging up their investment outlay and buying new altcoins,” said Don Guo, chief executive officer at Broctagon Fintech Group. He added that for bitcoin, investors will see it as an opportunity to buy bitcoin at a lower price.
(With inputs from agencies)