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Recently, the crypto market experienced a sharp pullback amid U.S. President Joe Biden introducing a draft proposal to raise capital gains taxes.
Speculations among investors are up that the said proposal by Biden Administration will curb investment in the crypto market.
Crypto Market Plunges Amid Biden Admin’s Capital Gains Tax Proposal
The cryptocurrency market experienced sharp pullback after the President of the United States, Joe Biden unveiled a draft of proposed changes to the U.S. tax code, including a plan to nearly double taxes on capital gains to 39.6% for people earning more than $1 million.
The crypto community is of the view that the plan could hurt cryptocurrencies with individual investors complaining about losses on social media since the announcement was made.
However, veteran traders and analysts see that the declines are temporary amid growing retail and institutional investor acceptance of digital currencies.
For instance, Avi Felman, head trader, and portfolio manager at BlockTower Capital, said:
“Western funds started offloading Bitcoin aggressively on the back of the Biden tax plan. Ultimately news-based selling generally reverses.”
Ether has dropped by 10.3% to as low as $2,185.46, a day after climbing a record $2,645.97. While Bitcoin has fallen by 9.8% to $48,280.
The leading cryptocurrency has declined for the sixth time in over a week, extending losses after the hike in capital gains proposal were revealed. Meanwhile, investors are already facing capital gains tax if they are holding cryptocurrencies for over a year.
Altcoins Continue to Rise Amid Bitcoin’s Dip
Bitcoin’s (BTC) recent downturn temporarily pulled its dominance rate down to 49.5%, the lowest level since August 2018. This has resulted in traders predicting that altcoins will outperform Bitcoin in the short term.
Since the past months, altcoin’s price movements have been completely cut off from that of the flagship cryptocurrency. For instance, when Ethereum hit its new all-time high earlier this week, Bitcoin’s price was down by 20% from its all-time high.
Perhaps the rise of the decentralized finance space has resulted in the favor for altcoins.