Bitcoin declined for the seventh time in eight days, extending losses after President Joe Biden was said to propose almost doubling the capital-gains tax for the wealthy.
The slide pushed Bitcoin down as much as 5.8% to about $48,596 as it continued to lose momentum.
JPMorgan Chase & Co. and Tallbacken Capital Advisors LLC had recently warned there was potential for further downside after the largest cryptocurrency fell back from its record high of $64,870 on April 14 and took out key technical levels.
“Bitcoin has slipped below the 50-day moving average support that it held sacrosanct through this rally,” said Pankaj Balani, CEO of Delta Exchange. “It looks like there is more downside here.”
Tax concerns may be weighing, too. U.S. investors in the digital asset, which has advanced more than 70% this year despite its recent pullback, already face a capital gains tax if they sell the cryptocurrency after holding it for more than a year.
But the coin’s been one of the best-performing assets in recent years — anyone who bought a year ago is sitting on a nearly 575% gain. For investors who bought in April 2019, it’s roughly 800%.
“One of the biggest things you have to worry about is that the things with the biggest gains are going to be most susceptible to selling,” said Matt Maley, chief market strategist for Miller Tabak + Co.
“It doesn’t mean people will dump wholesale, dump 100% of their positions, but you have some people who have huge money in this and, therefore, a big jump in the capital gains tax, they’ll be leaving a lot of money on the table.”
The IRS has stepped up enforcement of tax collection on crypto sales. The agency — which began asking crypto users to disclose transactions on their 2019 individual tax returns — asks taxpayers whether they “received, sold, sent, exchanged or otherwise acquired any financial interest in any digital currency.”