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U.S. President Joe Biden’s Capital Gains Tax Hike Plan Left Bitcoin Tumbling

5 min read


U.S. President Joe Biden’s Capital Gains Tax Hike Plan Left Bitcoin Tumbling

Yesterday on 23rd April 2021, Bitcoin (BTC) recorded a market price below $50,000 for its first time since March. Coinbase, which is one of the largest U.S. Crypto exchanges, recorded a price drop as low as $48,492.95 on early Friday.

The U.S. President Joe Biden’s Plans on raising tax on capital gain attributed to the sudden dip of bitcoins and other cryptocurrencies. In response to that, the coin market cap recorded a wipeout of about $300 billion of investors’ capitalization from the entire cryptocurrency market.

Some analysts said that the Bitcoin plunge experienced on Friday resulted from a power blackout in Xinjiang, China. It is said to be a region where large-scale bitcoin mining occurs. That caused the sudden Bitcoin plunge as a result of transactions back up.

President Joe Biden’s plan is considered to raise the tax rate above 50% in some U.S. States. It is a strategy that targets high-income earners above $ 1,000,000 gains.

Some of the features of Biden’s plan are on equities such as revenues. A proposed tax fee of as much as 39.6% will increase from the present 23.8% on gains. However, experts say that cryptocurrencies are prone to the effect on short runs only.

The move to increase tax will accelerate unemployment in tax-friendly states like California, Florida, Texas, and New York states that do not have a state income tax. Additionally, the U.S., European Union, and the U.K. expressed their concerns about digital assets like bitcoin, terming it as a way of laundering taxpayers’ money to fund illicit activities like terrorism.

Janet Yellen, a nominee treasury secretary in President Joe Biden’s administration, said there is the need to examine ways to curtail the use of Bitcoins and digital currencies to ensure money laundering does not take place in the channels.

Yellen referred to bitcoin as a highly speculative asset, and Biden’s proposed tax on capital gain should be as high as 80% on crypto trading. On the other hand, China is advancing into testing digital currency. A huge difference is evident in two world-leading economies. As China rises to digital assets, the U.S. misunderstands how powerful blockchain tech and crypto can be.

Despite Bitcoin changing hands at a 23% dip on Friday from $64,829.14 to $48,492.95, it is still 69.79%. Biden’s tax on capital gains increase will also include 3.8% Obama Care to make tax on investments rate to 43.4%.

Meanwhile, the federal tax rate will include a capital gain tax rate of 11.85% plus a 3.8% tax in New York, 13.3 % in California. When the proposed tax increase rate is added, a new rate will top to at least 60% in both states.

On Thursday, the stock market dragged down only to recover its territory on Friday. Similar occurrences reflected on cryptocurrencies which later rebounded. Biden’s plan on taxing equities left investors reeling with fear of high taxes eroding their revenues, and dampening interest on volatile assets like Bitcoin, Litecoin, or Ethereum.

Conclusion

Today, it is still unclear how high taxing on capital gains might affect start-up capital for innovators and foreign investors in the U.S. It is also unpredicted how Biden’s plan to tax capital gain will affect the cryptocurrency market. Looking at earlier scenarios before the Bitcoin plunge on Friday, the cryptocurrency had appreciated more than 100% in 2021 as compared to 2020. Independent and institutional investors contributed more in raising the Bitcoin price by buying and holding it with speculations of the future price increase. Some kept it as a hedge against inflation.