US President Biden has announced plans to almost double capital gains taxes for people earning more than $ 1 million a year.
Ether cryptocurrency pulled back sharply from an all-time high and rival Bitcoin also fell on Friday amid speculation that US President Joe Biden’s plan to raise capital gains taxes will limit investments in digital assets.
The cuts came after Biden unveiled several proposed changes to the U.S. tax code on Thursday, including a plan to nearly double capital gains taxes to 39.6% for people earning more than $ 1 million per year.
But as social media lights up with posts about the plan hurting cryptocurrencies and individual investors complain about losses, traders and analysts have said the declines are likely to be temporary amid growing backdrop. acceptance by retail and institutional investors of digital currencies as a legitimate asset class.
“This is what everyone is talking about now,” Chris Weston, head of research at Pepperstone Markets Ltd, a Melbourne-based currency broker, told Reuters news agency, referring to the tax plan.
“And I think you can have some technical sales going on. Ether was the poster child of the movement. It has massively outperformed Bitcoin. “
Ether plunged more than 10% to $ 2,140, a day after hitting a record high of $ 2,645.97. It last traded down 6.5% to $ 2,243.95.
“ Sensitive to sale ”
Bitcoin also weakened, falling 3.62% to $ 49,824.97, its seventh day of losses in the last eight.
JPMorgan Chase & Co and Tallbacken Capital Advisors LLC had recently warned that there was potential for further losses after the largest cryptocurrency fell from its all-time high of $ 64,870 on April 14.
U.S. investors in the digital asset, which has grown over 70% this year despite its recent decline, already face a capital gains tax if they sell the cryptocurrency after owning it. for over a year.
But the coin has been one of the best performing assets of recent years – anyone who bought it a year ago is sitting on a gain of almost 575%. For investors who bought in April 2019, it’s around 800%.
“One of the biggest things you need to worry about is that the things with the biggest gains are going to be the most likely to sell,” said Matt Maley, chief market strategist at Miller Tabak + Co. “That doesn’t mean people will. wholesale emptying, emptying 100% of their positions, but there are people who have a lot of money in there and therefore a big increase in capital gains tax, they will leave a lot of money on the table.