The possibility of paying slightly higher taxes on investment sent stock markets and Bitcoin tumbling down
Rabat – The popular cryptocurrency Bitcoin dropped on Friday, April 23, after rumors of a possible increase in US capital gains taxes. This week’s leaked details of US President Joe Biden “considering” a possible tax hike sent markets into a panic on Friday as investors sold off investment assets.
Bitcoin became one of the primary victims of the panic sell-off, as the world’s most famous cryptocurrency lost 27% of its value.
Over $200 billion in value disappeared in thin air as the iconic crypto coin dropped at the news that Biden could possibly, in the future, increase taxes on investment gains that are taxed well below earnings made through salaried labor.
The drop in Bitcoin’s value comes after a strong year for the currency. In 2020, the cryptocurrency increased nearly sixfold in value. Bitcoin gained 66% in 2021 alone, reaching $65,000 per bitcoin. In March the currency slowly dropped in value, culminating in Friday’s sell-off.
The dramatic drop in Bitcoin’s value did not discourage many of the enthusiasts of the blockchain-driven digital currency. Seen as a market correction, many experts described the sudden drop on Friday as a “healthy” pullback that could indicate the currency could still rise to $100,000 in value before the end of the year.
Skeptics of Bitcoin and other cryptocurrencies interpreted Friday’s tumble as signs that the popular crypto’s “rally could falter.” “The weekend plunge underscored the fragility of bitcoin’s recent advance,” financial journalists Alexander Osipovich and Paul Vigna wrote in the Wall Street Journal.
“Bitcoin is on track to close out its biggest weekly drop since February when prices fell 21% before making a sharp recovery and breaking to all-time highs near $64,900,” wrote Sebastian Sinclair of Yahoo Finance.
The recent market instability following the news of a possible tax hike on investors appears to be partly symbolic as investors fire a shot across the bow of the US administration. The moves appear to indicate that if the Biden administration chooses to tax investors on their income, at a similar rate as regular working people are taxed, they will feel “discouraged” from investing.