- Bitcoin price dipped below $50,000 after an announcement revealed that US President Joe Biden could increase capital gains taxes for the rich.
- The leading cryptocurrency fell in tandem with the US stock market as fears of a potential tax hike loom.
- Despite Bitcoin’s dominance decline, miners have started to accumulate the world’s largest cryptocurrency.
The cryptocurrency market experienced a shakeout as President of the United States Joe Biden announced a new proposal to increase tax gains for the rich.
Bitcoin price falls below $50,000
The world’s largest cryptocurrency, Bitcoin, slumped to lows nearing $50,000, falling in tandem with the US stock market shortly after the announcement. At the time of writing, Bitcoin price fell under the $50,000 mark, reaching $48,750 on Binance.
President Biden aims to increase the capital gains tax rate to 43.3% for Americans with incoming exceeding $1 million. Targeting the wealthiest citizens in the United States, Biden plans to roll out the biggest ever increase in levies on investment gains for funding in healthcare, pre-kindergarten education and paid leave for workers.
The announcement comes after the effects of the COVID-19 pandemic widening the wealth gap, where financial fallout was concentrated among certain cohorts, including minorities, lower earners, and women.
Currently, American investors pay. 23.8% top rate on long-term capital gains includes a 20% capital gains tax on assets held in taxable accounts for more than a year. The Biden administration plans to tax capital gains as ordinary income, with a top proposed rate at 39.6%, which applies to the wealthy with more than $1 million in annual income.
According to Bloomberg, with the Medicare surtax kept in place, the top long-term capital gains would result in 43.4%. Certain aspects of the plan remain unclear, as Biden is expected to release more details about the proposal next week. Prominent venture capitalist Tim Draper suggested the tax hike could mean a decline in job creation. He added:
43.4% capital gains tax might kill the golden goose that is America/Silicon Valley. People need an incentive to build long-term startups of value. In California, that would be a 56.4% tax burden.
Bitcoin sheds bull rally gains
The Dow Jones Industrial Average fell 400 points as the news hit the US stock markets, as investors rushed for the exits.
Bitcoin price dropped to below $50,000 and is now struggling to rebound. IntotheBlock’s In/Out of the Money Around Price (IOMAP) model shows that BTC could plunge further towards support around $47,693, where around 400,000 addresses hold 130,000 Bitcoin.
Bitcoin IOMAP
The pioneer cryptocurrency made highs of over $64,000 last week and plunged towards $50,000 earlier this week amid mining halts in China after a massive power outage in Xinjiang. As such, Bitcoin address activity has also dropped close to month-low levels and is struggling compared to prior weeks.
Bitcoin address activity
Bitcoin’s price action also dragged its dominance down to under 50%, the lowest level seen since August 2018. Despite Bitcoin’s declining dominance, data shows that investors could be taking advantage of the dip. Glassnode data shows that miners have not only stopped selling Bitcoin but have also continued to accumulate the leading cryptocurrency.
Bitcoin miner net position change
Not necessary to push the sell button
According to tax experts, the plan may exempt a portion of wealthy investors’ capital gains from higher tax. Certain taxpayers, including business owners, may also be exempt from the levy.
Only four years ago, the Trump administration cut taxes for many individuals, which indicates that conditions could change quickly. Jack Ablin, chief investment officer and founding partner of Cresset Capital Management, suggested:
I wouldn’t necessarily push the sell button on rumors. That doesn’t make a lot of sense to me. There will be plenty of time to plan and respond to any tax or tax proposal that’s ultimately in place.
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