Cryptos: Bitcoin drops below $50,000, dented by rising U.S. tax worries

United States

The price of bitcoin dropped below the psychologically important $ 50,000 level on Friday, as worries over rising U.S. taxes filtered over to cryptocurrencies, adding to recent pressure already simmering on those alternative investments.

Bitcoin prices BTCUSD, -5.11% last changed hands at $ 49,225, a slide of nearly 10% over 24 hours and a level not seen since early March, according to Coindesk. Losses were spread across other cryptocurrencies, with ether  ETHUSD, -7.69%,  on the ethereum network, also droppping around 10% over the same time period, trading at $ 2,219. XRP  XRPUSD, -14.88%,  which is pegged to Ripple, has lost 21% in 24 hours, last trading at a new high of $ 1.00.

The fresh losses for bitcoin represent around a 24% drop from a recent peak of $ 64,829 for the cryptocurrency, meeting the widely accepted definition of a correction. Bitcoin saw a sharp slide last weekend, though the cryptocurrency’s volatility mean slides of more than 10% are not unusual. Fears of increased regulation were at the heart of last Sunday’s pullback.

Friday’s losses come on the heels of a 300-point loss for the Dow industrials DJIA, -0.94% after a media report that President Joe Biden is weighing a plan to nearly double capital-gains tax on the wealthy.

“It is clear that Bitcoin is more sensitive to capital gains tax threats than most ‘asset’ classes. The threat of regulation, either directly in developed markets or indirectly via the taxman, has always been crypto’s Achilles’s heel, in my opinion,” Jeffrey Halley, senior market analyst at OANDA, told clients in a note.

Halley said the next bitcoin level he’s watching out for is $ 42,000, which “might come this weekend, or next week or perhaps not at all.”

“Hopefully, we will hear as many ‘experts’ saying this is a sign of bitcoin becoming a ‘maturing mainstream asset’ if it falls 10% this weekend, as we do when it rises, or a crypto-exchange chooses to IPO,” he said.

A number of analysts have warned of a near-term downturn for bitcoin as the cryptocurrency has continued to track lower after reaching an all-time peak above $ 64,000 following the direct listing of cryptocurrency platform Coinbase COIN, -5.92%.