The value of the digital currency fell to just below $50,000, its lowest since early March. According to CoinMarketCap, the drop represented the wiping out of $200 billion in market value — a startling reminder of cryptocurrency’s persistent volatility.
Taxation and Regulation
It’s not entirely clear what caused the drop, but it’s reasonable to suspect that Biden’s plans to raise the capital gains tax for the wealthiest Americans to 43.4 percent may have led to a wave of selling, as CNBC suggests.
Analysts had also warned earlier this week that the value of Bitcoin is about to drop significantly after hype surrounding the public listing of cryptocurrency exchange Coinbase caused values to soar.
“Bitcoin headed South today after President Biden signaled that he wanted to raise capital gains tax in the US,” Jeffrey Halley, senior market analyst, told Global News. “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.”
Halley also noted that taxation and market regulation “remain the crypto markets’ Achilles Heel.”
Despite the dip, though, Bitcoin is still up 65 percent since the start of this year.
Not everybody is convinced Biden’s tax plan was to blame.
“I don’t think Biden’s taxes plans will have a big impact on bitcoin,” Ruud Feltkamp, CEO at automated crypto trading bot Cryptohopper, told Global News.
“Bitcoin has only gone up for a long time, it is only natural to see a consolidation,” Feltkamp argued. “Traders are simply cashing in on winnings.”