Bitcoin: market continues to drop on Biden tax hikes

Fri 23 Apr 2021 ▪ 11h06 ▪ 5 min read — by CryptoKing

After a sudden flash crash over the weekend due to apparent power outages in China, amongst other things, this week is going from bad to worse for crypto enthusiasts as altcoins continue to bleed and Bitcoin is failing to maintain $50,000. Reports of U.S. President Biden planning to raise capitals gains tax for the wealthy seems to be the source of concern.

From bad to worse

While flash crashes are not uncommon in the cryptocurrency market, the flash crash in the early hours of Monday morning did seem to be bucking the trend. There was hype in the community that Bitcoin was consolidating and gearing up for $68,000 (~£49,000). However, the drop-down from over $61,000 (~£44,000) to just under $52,000 (£37,500) quickly put this theory to bed. Renewed fears of bull fatigue seemed to have gripped the market.

Then after a positive day of trading yesterday, Thursday 22nd April, Bitcoin and consequently altcoins started to retreat once again in the late evening. News started to filter through that America’s newest president, Joe Biden, and his administration were looking to increase a slew of taxes. More importantly, for cryptocurrency HODLers who have been profiting off this bull market for many months now, he was almost doubling capital gains tax.

Of course, like with all news it seems it has been taken out of context – although there are definitely those who have been heavily invested and may have profits in the millions. The increased capital gains tax from 20% to 39.6% is for those earning more than $1 million (~£720,000). This means the majority of Americans will not be affected. Is the US government becoming the new Robin Hood?

Bitcoin USA
There is a lot of profit in Bitcoin

Decoupling from stock market?

There is a lot of talk in the community about whether cryptocurrencies will ever be seen as a completely different asset class than traditional stocks. This week has shown, with the recent slew of institutional investment, this is still a long way off.

With such a mobile, digital asset like Bitcoin, you’d think American investors would just say ‘au-revoir’ to their homeland and seek greener and more crypto-tax friendly pastures. Portugal or Georgia anyone? However, unfortunately, we are not there yet. Cryptocurrency is still very much exposed to global trends and news. This won’t be changing any time soon.

So is this bad news for Bitcoin?

Not necessarily. In an ever more digitalised world, governments need to be very careful how they tax their citizens. The USA already has a very aggressive tax policy, which taxes citizens no matter where they live. If governments are not careful it will not only be the super-rich renouncing citizenship and setting up their tax domicile in tax havens, it will be the humble Bitcoin trader too. Trust me, my £850 rent per month for a box room in Camden could get me a luxury apartment in Tbilisi. Don’t even talk to me about the living costs either!

What other asset could you carry around with you so easily and then convert in an instant to any other crypto or fiat currency? Cryptocurrency is undoubtedly the future for a digital, global and flexible human race. However, expect many bumps in the road before we reach the holy grail of mass adoption.

Paying tax on profits is normal but when is it too much?

Buy the dip

If you browse around crypto Twitter you have probably seen the shouts of “buy the dip!” It certainly is tempting when you think less than a week Bitcoin was trading at over $65,000 (~£47,000). Does that mean Bitcoin is at a 26% discount right now? Yes and no. Buying dips certainly does work as a strategy for some. However, dollar-cost-averaging (DCA) is a proven method to mean you will have no FOMO (fear of missing out) or FUD (fear, uncertainty or doubt).

Apps like Crypto.com have a function that will help you DCA automatically. Download it and check out the wealth of other features it offers, plus earn yourself a free $25 (£18) worth of cryptocurrency.

Keep calm and carry on

No one said investing in cryptocurrency was easy. There will be many more moments like this but it is important to remember “form is temporary, class is permanent”. What that means for Bitcoin is that it may be down today or this week but overall Bitcoin’s fundamentals still stand strong. For the latest Bitcoin news and market data at your fingertips make sure you visit our markets page daily. Any feedback would be greatly appreciated!

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CryptoKing

Just your average global millennial embracing, and interested in, the future of money and finance. Excited by blockchain tech as well as fintech but have a special passion for DeFi and Yield Farming, what will this technological disruption bring next?

DISCLAIMER

The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.

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