Bitcoin values tumbled by 7.9% early Friday over fears that the government will increase taxes in the near future, putting it at $47,525 per coin.
It was the first time the world’s largest cryptocurrency fell below the $50,000 level since early March. Smaller cryptocurrencies like Ether and XRP fell 3.5% and 6.7%, respectively. Experts anticipate more downslide in the days ahead.
President Biden recently proposed increasing capital gains taxes for the wealthy (those earning more than $1 million per year) to 39.6 percent. Concern about the potential impact of higher taxes was mirrored in the market this week. Investors in Bitcoin already face a capital gains tax if they sell the cryptocurrency after holding it for more than a year.
"With a high growth rate in the bitcoin price, crypto holders that have accrued gains will be subjected to this tax increment," said Nick Spanos, founder at Bitcoin Center NYC. He sees bitcoin dropping further in the coming days.
Also contributing to Bitcoin’s Friday slump were regulatory concerns, fears over valuation, and “bullish exuberance at overbought levels,” according to Fawad Razaqzada, a market analyst at ThinkMarkets. Industry analysts say investors may want to brace for the possibility of more volatility ahead.
“People have been talking about the capital gains tax and U.S. stock-market selloff being the catalyst of this,” Todd Morakis, co-founder of digital-finance product and service provider JST Capital, told Bloomberg. “If it is true we’ve moved too much -- but once Bitcoin gets a head of steam it is tough to stop unless you are at a technical area.”