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Biden Tax Plans Hit Crypto Assets With Bitcoin Dropping Below $50,000

Biden Tax Plans Hit Crypto Assets With Bitcoin Dropping Below $50,000
Concerns about a fall in investments in digital assets because of the plans of the United States President Joe Biden to raise capital gains taxes led to a sharp drop in the prices of bitcoin and other crypto currencies.
This drop in crypto currencies was preceded by reports about plans of the Biden administration to draft a proposal to change the US tax code including its plan to almost double taxes on capital gains to 39.6 per cent which will be aimed at people who earn more than $1 million annually.
There was a 5 per cent drop in the price bitcoin, the biggest and most popular crypto currency, at $48,867 that was well below the $50,000 mark for the first time since early March. The price of smaller digital currencies - Ether and XRP, dropped by about 7 per cent.  
Reports the Biden administration’s plans of increasing taxes hit the markets which prompted a sell off to book profits in stocks and other risk assets which have been rallying on the optimism of a strong economic recovery.  
Levies on investment gains were reported to be in line for record increases.
"Bitcoin headed South today after President Biden signalled that he wanted to raise capital gains tax in the US," said Jeffrey Halley, senior market analyst, Asia Pacific, at OANDA. "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."
"I firmly believe that developed market regulation and/or taxation remain the crypto markets' Achilles Heel," he added.
Bitcoin is expected to drop by as much as 15 per cent for the entire week even though this digital currency will still be 65 per cent higher than its value at the beginning of the year.
There was a drop of more than 10 per cent in ether in the day as it touched a low of $2,107 just a day after it had reached record value of $2,645.97.
However some traders and analysts are of the opinion that the drop in the prices of crypto assets is a temporary one even though social media was abuzz about the plan hurting crypto currencies and many retail investors complaining of losses.
"I don't think Biden's taxes plans will have a big impact on bitcoin," said Ruud Feltkamp, CEO at automated crypto trading bot Cryptohopper. "Bitcoin has only gone up for a long time, it is only natural to see a consolidation. Traders are simply cashing in on winnings," Feltkamp added.
There was also optimism among others about the long term prospects of bitcoin. However there were concerns about the increase of prices taking more time.
"There are reasons to believe the overall trend will remain bullish unless the price drops below $40k," said Ulrik Lykke, executive director at crypto hedge fund ARK36. "At the moment, we are not convinced that the trend will reverse into a bear market but we acknowledge it may take some time before the demand overtakes the supply again in the medium to short term."

Christopher J. Mitchell

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