Finance

Biden’s tax plan prompts crypto sell-off, forcing bitcoin below $50k support line

Cryptocurrency prices have fallen across the board, ending a recent rally for ether and pushing bitcoin below the $50,000 mark.

Bitcoin has fallen more than 10.4% in the last 24 hours to $48,770, while ether dropped 11.6% to $2,194 and XRP more than 20% to $1.04. Prices are as of 8am BST on 23 April, according to data from Luxembourg-based exchange Bitstamp.

The $50,000 mark is viewed as a key support threshold for bitcoin reaching higher prices, meaning its fall below this point could knock investor confidence and push the cryptocurrency into correction territory.

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The sell-off occurred following reports of US President Joe Biden’s comments around the launch of capital gains tax reform that would affect the country’s ultra-wealthy far and wide. The White House is planning to nearly double CGT for those with earnings of $1m or more, taking the rate to 39.6%, Bloomberg reported.

Bitcoin still represents a major gain for anyone who invested this year, having risen more than 67% year to date as of 23 April. At its all-time high of roughly $64,500 on 14 April, the cryptocurrency had more than doubled its value since the start of 2021.

It is clear that bitcoin is more sensitive to capital gains tax threats than most ‘asset’ classes

Meanwhile, ether reached all-time highs only a day earlier as confidence poured into the digital asset while bitcoin faltered. Analysts predicted that it may be a sign ether is starting to break out of bitcoin’s shadow, though upgrade issues with its underlying Ethereum network remain.

READ  Ether breaks out from bitcoin’s shadow in fresh all-time highs

Tax concerns have long weighed on the cryptocurrency sector, with different rules appearing in various geographies. In the US, the IRS views cryptocurrencies as an asset — making the tokens virtually unusable as a form of everyday payment, as taxpayers must declare all crypto transactions.

“It is clear that bitcoin is more sensitive to capital gains tax threats than most ‘asset’ classes. The threat of regulation, either directly in developed markets or indirectly via the taxman, has always been crypto’s Achilles’ heel, in my opinion,” Jeffrey Halley, senior market analyst at Oanda, told clients in a note seen by The Wall Street Journal.

Halley predicted that the next level bitcoin could fall to is $42,000, which “might come this weekend, or next week or perhaps not at all.”

“Hopefully, we will hear as many ‘experts’ saying this is a sign of bitcoin becoming a ‘maturing mainstream asset’ if it falls 10% this weekend, as we do when it rises, or a crypto exchange chooses to IPO,” he added.

To contact the author of this story with feedback or news, email Emily Nicolle

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