US President Joe Biden is willing to impose a much higher tax, not only on bitcoin, but on earnings derived from investors’ capital gains. The tax rate could be as high as 43.4%, doubling the current rate of around 20%. The tax would apply to those with gains of at least $1 million.
The decision to raise taxes was made in order to have funds to invest in social welfare. No official comments have yet been received from the White House, so everything is still mere rumours. However, the Capital-Gains Plan is expected to be made official in the next week by the US President, and it is quite likely that it will be used to fund the American Families Plan. Bloomberg reports.
Biden’s tax affects bitcoin
The rumour of this sort of “wealth tax” has also hit the cryptocurrency sector, led by bitcoin. The risk investors are afraid of is that the tax could hit those who choose bitcoin and crypto assets in particular, given the high gains, especially at this stage of the year.
Indeed, 2021 is proving to be an extraordinary year, with Bitcoin, Ethereum, Binance Coin, Cardano and Polkadot (just to name the most capitalized) experiencing real rallies culminating in price records unthinkable just a few months earlier.
However, since this news broke last night, bitcoin has lost 10%, dropping under $50,000. This brings bitcoin to a weekly loss of around 20%, moving away from its previous peak of $65,000. Ethereum, which had hit a record high of $2,600, is now also heading back towards the $2,000 mark.
We will have to wait until next week, when Biden’s plans on taxes and welfare will be finalized. In any case, volatility is a characteristic that plagues the cryptocurrency sector, so these jolts are of little concern to those with experience. However, when the US President’s policies are settled, further price turbulence cannot be ruled out.