Bitcoin fell below $ 50,000, and the cryptocurrency market lost more than $ 200 billion in a day. According to Coinmarketcap, the largest cryptocurrency lost almost 10% over the day and is now trading at around $ 49,560. Bitcoin dropped below $ 50,000 for the first time since early March. Ether consolidated at $ 2300, down 10.7%. XRP, the fifth largest cryptocurrency, fell 16%. The capitalization of the entire cryptocurrency market has decreased by more than $ 200 billion.
“Overall, the market has grown quite a lot and is now likely to have a pullback before the next bounce,” Vijay Ayyar, director of business development at cryptocurrency company Luno, wrote to CNBC by email.
President Biden is expected to raise the tax on long-term capital gains for wealthy Americans to 43.4%, including surcharge. This is higher than the maximum federal income tax rate. The new tax rate will apply to income from assets held in taxable accounts and sold more than a year later.
This triggered a sell-off in equity markets, and on Thursday all three major US indices closed in the red. Fears over Biden’s capital gains tax proposal could spread to crypto investors, who have had a good year, after Bitcoin has surged more than sixfold in the past 12 months, analysts said.
The industry will continue to develop
However, according to one entrepreneur, Biden can provide a service to the industry.
“It would be more appropriate to use this old trick for financial management: borrow money against assets to avoid taxes on capital gains,” said Anthony Trenchev, co-founder of the Nexo lending platform. “And what could be better than collateral, which – despite the current drop in prices, most likely caused by the aforementioned proposal – is becoming more expensive like bitcoin?” He added.
In 2021 alone, bitcoin grew by 66%, while ether – the digital token of the Ethereum blockchain – grew by more than 200%. In part, this jump is due to the purchase of bitcoin by institutional investors. In addition, companies like Tesla and Square have also bought billions of dollars worth of bitcoin.
At the same time, banks also offer clients services that will allow them to participate in the bitcoin market. In March, Morgan Stanley said it was launching access to three funds that allow owning bitcoin, CNBC reported.
“The market is getting better,” Eric Demuth, CEO and co-founder of cryptocurrency exchange Bitpanda, said Friday on CNBC’s Squawk Box Europe program. “The more money gets into the market, the lower the volatility will be.”
He also added: “At the same time, retail investors who come to this market should always adhere to the following strategy: never put everything in one basket and just invest in cryptocurrency, in Bitcoin, a very small part of their portfolio. And no matter how much you believe in it, the main thing is to diversify your assets. ”
However, concerns about regulatory pressure on Bitcoin continue to cloud the market’s prospects. Jesse Powell, CEO of major cryptocurrency exchange Kraken, warned that governments could restrict the use of bitcoin and other cryptocurrencies.
As Reuters reported last month, India plans to impose a ban on trading or even owning cryptocurrencies. In February, US Treasury Secretary Janet Yellen called Bitcoin “an extremely speculative asset” and said she was worried about potential losses for investors.
Authorities around the world are exploring measures to help regulate Bitcoin. Last week, the deputy chairman of the People’s Bank of China called bitcoin an “investment alternative”, which heralded a more positive outlook on cryptocurrencies after tightening restrictions by the country’s regulators in 2017 and 2018.