20:59Bitcoin price falls below $50K as investors rush to exit crypto markets on Biden's tax proposal
President of the United States Joe Biden is expected to propose a new top rate for capital gains tax rate for wealthy individuals. Subsequently, the cryptocurrency markets crashed as investors fear high taxes as a result of cashing out of digital assets.
Biden plans to tax the rich
The world’s largest cryptocurrency by market capitalization, Bitcoin, slumped to lows nearing $50,000, falling in tandem with the US stock market.
Investors seem to have reacted to President Biden’s plan to increase the capital gains tax rate to 43.3% for Americans with income exceeding $1 million. Targeting the wealthiest citizens in the US, Biden aims to roll out the biggest ever increase in levies on investment gains for funding in healthcare, pre-kindergarten education, and paid leave for
The announcement comes after the effects of the COVID-19 pandemic widened the wealth gap, where financial fallout was concentrated among certain cohorts, including minorities, lower earners, and women.
Currently, American investors pay a 23.8% top rate on long-term capital gains including a 20% capital gains tax on assets held in taxable accounts for more than a year. The Biden administration plans to tax financial gains as ordinary income, with a top proposed rate at 39.6%, which applies to the wealthy with more than $1 million in annual income.
According to Bloomberg, with the Medicare surtax kept in place, the top long-term capital gains would result in 43.4%. Certain aspects of the plan remain unclear, as Biden is expected to release more details next week.
Prominent venture capitalist Tim Draper suggested the tax hike could mean a decline in job creation. He stated:
43.4% capital gains tax might kill the golden goose that is America/Silicon Valley. People need an incentive to build long-term startups of value. In California, that would be a 56.4% tax burden.43.4% capital gains tax might kill the golden goose that is America/Silicon Valley. People need an incentive to build long-term startups of value. In California, that would be a 56.4% tax burden.
Bitcoin sheds bull rally gains
Likewise, Bitcoin price dropped below $50,000 and is now struggling to rebound. IntoTheBlock’s In/Out of the Money Around Price (IOMAP) model shows that the flagship cryptocurrency could plunge further towards support around $47,693, where around 400,000 addresses hold 130,000 BTC.
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