Biden capital gain tax fears crypto market, drops over 10%

The second largest cryptocurrency, ether pulled back sharply after reaching a new all-time high and Bitcoin also fell on Friday amid speculation that U.S. President Joe Biden’s plan to raise capital gains taxes will restrict investment in digital assets.

Biden capital gain tax fears crypto market, drops over 10%

The market drop came after Biden unveiled proposed changes to the U.S. tax code, including a plan to raise capital gains to 39.6%, almost double, for people earning more than $1 million.

As social media flooded up with posts about the plan hurting crypto, individual investors complaining about losses, traders and analysts said declines are likely temporary amid growing retail and institutional investor acceptance of digital currencies as a legitimate asset class.

Ether plunged more than 10% to as low as $2,140, a day after climbing a record $2,645.97 and lastly traded down 6.55% at $2,242.90. Bitcoin also weakened, falling below $48,000.

Biden’s capital gains tax hike plan caused turmoil during New York trading of cryptocurrencies that also spilled into the Asian session, but likely expected to return soon, traders hoped.

“Western funds started offloading Bitcoin aggressively on the back of the Biden tax plan,” said Avi Felman, head trader and portfolio manager at BlockTower Capital, a crypto and blockchain investment firm in New York. “Ultimately news-based selling generally reverses.”