Bitcoin Drops Below $50,000 Amidst Rising U.S Tax Worries, Ether Follows

Bitcoin has fallen beneath the $50,000 psychological support line hitting its lowest point in 48 days.

Bitcoin (BTC) is currently exchanging hands at $49,254.83 as of 10.00 A.M East African Time, a 9% drop over the last 24 hours.

bitcoin chart
Bitcoin Performance Chart
“On-chain data suggests we’re still in a long-term bull market in the short-term, we might have a correction and going sideways in a broad range since the market is over-heated among retail investors.” Ki Young Ju, CEO, South Korea-based blockchain analytics firm CryptoQuant.
Ether also plunged more than 10% on Friday to as low as $2,140 a day after reaching a record high of $2,645.97.
ether chart
Ethereum Performance Chart
Volatile performance of Bitcoin and Ether

The drop in cryptocurrencies comes after U.S. President Joe Biden announced plans to raise capital gains taxes to curb investment in digital assets.

On Thursday, U.S. President Joe Biden unveiled a raft of proposed changes to the U.S. tax code, including a plan to nearly double taxes on capital gains to 39.6% for people earning more than $1 million.

However, despite the decline, analyst believe the slump in cryptocurrencies is only temporary.

If Ether manages to hold above $1,955 going into the weekend, its upward trend should remain intact. The next support for Bitcoin is at $40,665, but buyers are likely to emerge before that level is reached because its decline looks overdone, according to Kelvin Wong at CMC Markets in Singapore.

BTC has risen 74% this year, while Ether has more than tripled. Both have massively outperformed traditional asset classes. Part of that support has been because of increased buying of BTC by institutional investors. And companies such as Tesla and Square have bought billions of dollars worth of the digital currency too.

Banks are also trying to allow their clients to get involved in the BTC market. In March, Morgan Stanley said it was launching access to three funds that enable ownership of bitcoin.

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

India also announced plans to introduce a law to ban the trading or even ownership of cryptocurrencies. In February, U.S. Treasury Secretary Janet Yellen called bitcoin a “highly speculative asset” and said she was worried about potential losses for investors.

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

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