Death and taxes. Bitcoin and other digital coins plunged on Friday, in the process wiping off over $200 billion of the value of the cryptocurrency market amid tax worries in the United States.
President Joe Biden is expected to raise long-term capital gains tax for the wealthiest Americans to 43.4%, including levying a surtax.
That would be higher than the top federal tax rate on wage income. And the new tax rate would apply to returns on assets held in taxable accounts and sold after more than a year.
And while these reports immediately impacted the stock markets, it also led to a wave of selling in the crypto markets.
The selloff triggered in the stock markets overnight had all three major US indexes ending Thursday’s session in red. But the fear over Biden’s capital gains tax proposal had left analysts in fear that it would also extend to crypto investors.
Result? Bitcoin slumped more than 8% over a 24-hour period, amid panic that the tax increase on capital gains would also apply to those earning above $1 million via cryptocurrencies.
That said, while the shock effect is evident in all markets, the crypto domain is least likely to be affected over the long-term. Most expect the nature of cryptocurrencies to see straight through this dip, as more and more large-scale buyers enter with no intent on exiting the position.
The crypto space has had a great year, with Bitcoin climbing more than sixfold in the past 12 months.
We’ll just have to wait and see over the next few days whether this last dip is an overreaction to this capital gains tax proposal, or beginning of something else.
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