- Bitcoin marked its seventh loss in the last eight days by sliding below $50,000 on Friday.
- Other digital currencies declined after Biden was said to be eyeing a hike in tax rates on the rich.
- That drop led to $260 billion being wiped off the cryptocurrency market cap.
Bitcoin slid below $50,000 on Friday, extending losses for a seventh day in a row, while simultaneous drops in other digital currencies erased $260 billion off the total value of the cryptocurrency market.
The crypto market has come under fresh pressure after reports that US President Joe Biden is looking to double the capital gains tax rate on wealthy investors.
Biden’s proposals are aimed at funding expanded childcare and education programs. Federal tax rates, including an existing surtax on investment income, could be as high as 43% for those earning more than $1 million, according to Bloomberg.
The Internal Revenue Service has been executing tax collection on crypto gains. Crypto is taxed as property, not currency. The agency began requiring crypto investors to disclose transactions on their 2019 tax returns, asking whether they “received, sold, sent, exchanged or otherwise acquired any financial interest in any digital currency.”
“It is clear that bitcoin is more sensitive to capital gains tax threats than most ‘asset’ classes,” Jeffrey Halley, a senior market analyst at OANDA, said. “The threat of regulation, either directly in developed markets or indirectly via the taxman, has always been crypto’s Achilles’ heel. Yes, you could store those juicy capital gains offshore as a US citizen, but we know how the G-Man treats tax evaders. It is not pretty.”
JPMorgan warned this week there could be further downside for bitcoin if it fails to climb back above the $60,000-level. Guggenheim’s Scott Minerd also recently said bitcoin could pull back to $20,000 or $30,000 after rising much too fast in a short period of time.