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Over $200 billion wiped off cryptocurrency market in a day as bitcoin plunges below $50,000

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LONDON/GUANGZHOU, China — Bitcoin and other digital currencies plunged on Friday as a proposed capital gains tax hike from U.S. President Joe Biden led to a tide of selling.

At as midday EST, bitcoin was down 7.3% at $49,730, according to Coin Metrics data. It’s the first time bitcoin has traded inferior $50,000 since early March. Ether fell to $2,320, down 8%. XRP, the fifth-biggest cryptocurrency, plunged 16%.

This wiped out multitudinous than $200 billion of value from the entire cryptocurrency market, according to data from CoinMarketCap.

“The Stock Exchange has run up quite a bit overall, and it’s probably cooling off before the next leg up,” Vijay Ayyar, head of business development at cryptocurrency altercation Luno, told CNBC by email.

President Biden is expected to raise long-term capital gains tax for the wealthiest Americans to 43.4%, comprehending a surtax. That would be higher than the top federal tax rate on wage income. The new tax rate would apply to comes on assets held in taxable accounts and sold after more than a year.

This triggered a sell-off in dynasty markets overnight, with all three major U.S. indexes ending Thursday’s session in the red. Analysts said fears terminated Biden’s capital gains tax proposal may be extending to crypto investors, who have had a great year with the price of bitcoin obtaining climbed more than sixfold in the last 12 months.

Still, one crypto entrepreneur said Biden could be doing his application a favor.

“It would make even greater sense to play that oldest trick in the manage-your-finances-smart book: cadge against your assets to avoid capital gains taxes,” said Antoni Trenchev, co-founder of crypto lender Nexo.

“And what well-advised collateral than one that — despite today’s price dip, likely caused by the said proposal — appreciates in value similarly to Bitcoin?”

“Things are getting more established,” Eric Demuth, CEO and co-founder of digital asset broker Bitpanda, related CNBC’s “Squawk Box Europe” Friday. “The more money that gets into the market, the less volatility there wishes be.”

“And for the retail investors who are going in there, the strategy is always never to put everything in one basket and just put a very small fraction of your portfolio into cryptocurrency, into bitcoin. It doesn’t situation if you are a strong believer or not, the diversification of your assets is key.”

However, concerns over a regulatory crackdown on bitcoin continue to cloud the sell. Jesse Powell, CEO of a major cryptocurrency exchange called Kraken, warned governments could clamp down on the use of bitcoin and other cryptocurrencies.

India is planning to present a law to ban the trading or even ownership of cryptocurrencies, Reuters reported last month. In February, U.S. Treasury Secretary Janet Yellen ringed bitcoin a “highly speculative asset” and said she was worried about potential losses for investors.

Authorities around the humanity are looking into how to regulate bitcoin. The Deputy Governor of the People’s Bank of China, called bitcoin an “investment selection” last week, which marked a more progressive tone on cryptocurrencies after a fierce crackdown by the country’s regulators on the hustle in 2017 and 2018.

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