Bitcoin price falls below $50K as investors rush to exit crypto markets on Biden's tax proposal


Share:
  • Bitcoin price dipped below $50,000 after following the news that US President Joe Biden could increase capital gains taxes for the rich.
  • The leading cryptocurrency fell in tandem with the US stock market as fears of a potential tax hike loom.
  • While Bitcoin’s market share drops, miners have been accumulating BTC at a discount. 

President of the United States Joe Biden is expected to propose a new top rate for capital gains tax rate for wealthy individuals. Subsequently, the cryptocurrency markets crashed as investors fear high taxes as a result of cashing out of digital assets. 

Biden plans to tax the rich

The world’s largest cryptocurrency by market capitalization, Bitcoin, slumped to lows nearing $50,000, falling in tandem with the US stock market. 

Investors seem to have reacted to President Biden’s plan to increase the capital gains tax rate to 43.3% for Americans with income exceeding $1 million. Targeting the wealthiest citizens in the US, Biden aims to roll out the biggest ever increase in levies on investment gains for funding in healthcare, pre-kindergarten education, and paid leave for workers. 

The announcement comes after the effects of the COVID-19 pandemic widened the wealth gap, where financial fallout was concentrated among certain cohorts, including minorities, lower earners, and women. 

Currently, American investors pay a 23.8% top rate on long-term capital gains including a 20% capital gains tax on assets held in taxable accounts for more than a year. The Biden administration plans to tax financial gains as ordinary income, with a top proposed rate at 39.6%, which applies to the wealthy with more than $1 million in annual income. 

According to Bloomberg, with the Medicare surtax kept in place, the top long-term capital gains would result in 43.4%. Certain aspects of the plan remain unclear, as Biden is expected to release more details next week. 

Prominent venture capitalist Tim Draper suggested the tax hike could mean a decline in job creation. He stated:

43.4% capital gains tax might kill the golden goose that is America/Silicon Valley. People need an incentive to build long-term startups of value. In California, that would be a 56.4% tax burden.

Bitcoin sheds bull rally gains

The Dow Jones Industrial Average fell 400 points when the news hit the US stock markets, as investors rushed for the exits. 

Likewise, Bitcoin price dropped below $50,000 and is now struggling to rebound. IntoTheBlock’s In/Out of the Money Around Price (IOMAP) model shows that the flagship cryptocurrency could plunge further towards support around $47,693, where around 400,000 addresses hold 130,000 BTC. 

Bitcoin IOMAP

Bitcoin IOMAP

According to tax experts, the plan may exempt a portion of wealthy investors’ capital gains from higher tax. Certain taxpayers, including business owners, may also be exempt from the levy. 

Only four years ago, the Trump administration cut taxes for many individuals, which indicates that conditions could change quickly. Jack Ablin, chief investment officer and founding partner of Cresset Capital Management, suggested:

I wouldn’t necessarily push the sell button on rumors. That doesn’t make a lot of sense to me. There will be plenty of time to plan and respond to any tax or tax proposal that’s ultimately in place.

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Join Telegram

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended content


Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content

Editors’ Picks

Binance CEO calls CFTC suit “disappointing” as district court halts Voyager $1 billion sale to Binance.US

Binance CEO calls CFTC suit “disappointing” as district court halts Voyager $1 billion sale to Binance.US

Voyager’s deal with Binance’s United States entity, Binance.US, faced another hurdle on March 27, the same day that the Commodity Futures Trading Commission (CFTC) went after the crypto exchange. This is the second time in the span of a month that Voyager’s deal has been objected against by the government.

More Cryptocurrencies news

90% of Ethereum supply leaves exchanges as regulators struggle to classify ETH as Security or Commodity

90% of Ethereum supply leaves exchanges as regulators struggle to classify ETH as Security or Commodity

Ethereum is known not only as the second-biggest cryptocurrency but also as the second-generation cryptocurrency. The blockchain not only brought Decentralized Finance (DeFi) to the crypto space but also framed a target on its back following its Proof of Stake transition plan.

More Ethereum News

This is how EOS holders responded to the network's EVM testnet launch, what to expect this week

This is how EOS holders responded to the network's EVM testnet launch, what to expect this week

The first milestone on the EOS Network Foundation’s roadmap, the completion of the EOS EVM (Ethereum Virtual Machine) code, was achieved on March 22, starting the countdown to the launch of the EOS testnet. Well, it is finally here and the community is elated as it brings them closer to the mainnet release on April 14.

More Cryptocurrencies News

XRP price recovers above $0.44 as court ruling approaches, will Ripple win against the SEC?

XRP price recovers above $0.44 as court ruling approaches, will Ripple win against the SEC?

XRP price has kept its momentum, flashing green on the one-day timeframe as the countdown to the Ripple vs SEC lawsuit continues. The remittance token is moving in tandem with our prediction last week, soaring by a significant margin to secure a place among the best-performing cryptocurrencies on a one-week timeframe.

More Ripple News

Bitcoin: Should you trust this BTC sell signal or wait for $34,000?

Bitcoin: Should you trust this BTC sell signal or wait for $34,000?

Bitcoin price shows a clear picture of its rally after it breached a long-term bullish pattern in mid-January. As the rally takes a breather, sell signs have started to emerge, which is putting investors in a confused state. 

Read full analysis

BTC

ETH

XRP