Bitcoin price: Why is Bitcoin crashing? Joe Biden tax triggers ‘unintended consequences’

Bitcoin price: Why is Bitcoin crashing? Joe Biden tax triggers ‘unintended consequences’

April 23, 2021

Bill Gates says Bitcoin is a 'tour de force' in 2013

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Bitcoin (BTC) is treading uncertain waters today (April 23) and is down nearly 10 percent on the last 24 hours, according to Coindesk data at 4.31pm BST. News of a change to the capital gains tax sent ripples through the crypto market, possibly prompting a sell-off among whales hoarding the token. A report on Thursday said President Joe Biden was looking to almost double the capital gains tax from 20 percent up to an eye-watering 39.6 percent.

The move, which is seen as an attack on America’s wealthy elite, will also affect crypto investors who have made substantial gains this year.

Cryptos like Bitcoin and Ethereum slumped in response to the news, painting a bleak picture of what has already been an intense week for traders.

Ethereum (ETH), which peaked at £1,908.36 ($2,645.14) on Thursday, is now down more than 11 percent to £1,666.72 ($2,310.20).

Bitcoin is similarly trading at a loss, exchanging hands for £35,660.14 ($49,427.82) per token.

The flagship crypto has been tumbling all week and has hit the lowest level since early March.

And Dogecoin, which has become the most talked-about crypto of the month, has also been in a downward spiral this week after making incredible gains earlier this month.

President Joe Biden’s capital gains tax will affect those earning £722,425 ($1million) or more.

This will likely affect BTC holders who have hoarded substantial amounts of Bitcoin.

To put into perspective, someone holding just 20 BTC tokens at £36,100 ($50,000) is sitting on a pot of gold worth £722,425 ($1million).

Bitcoin 'at tipping point of mainstream acceptance' says expert

Why is Bitcoin crashing today?

The crypto markets are incredibly volatile and there is never a clear answer as to why any token is plummeting.

But the threat of a tax hike is bound to have a knock-off effect on the markets, considering just how big of a powerhouse Bitcoin has become since 2012.

According to Mat Greenspan, founder and CEO of Quantum Economics, the BTC sell-off might be an “unintended consequence” of the tax hike.

In his daily analysis of the crypto markets, he said: “As we saw last March, markets have a way of ignoring problems until they get right up to their nose.

“No doubt, the more this new tax bill gains momentum in Congress, and the more it looks like it will actually pass, the more investors may sell some holdings to avoid paying the higher rate.

“However, this only goes for those who are intending to exit the market in the near term.

“For anyone who is in it for the long haul, which I suppose is most of us, capital gains will only be reflected once the positions are closed.”

What does this mean? There is a chance crypto holders will offload some of their wealth to avoid paying a higher tax, even at the cost of losing out on gains.

However, Mr Greenspan added: “Of course, I have been wrong before.”

Crypto trading is a fickle affair and there is no guarantee profits will be made.

Like with all investments, you need to weigh up your options and prepare yourself for the worst.

You should never invest more money than you are prepared to lose.

According to the Financial Conduct Authority(FCA), cryptoassets are a high risk and speculative investment

The FCA said: “If you invest in cryptoassets, you should be prepared to lose all your money.”

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