Bitcoin wobbles on talk of Biden plan to increase capital gains tax

White House proposes hiking capital gains tax to almost 40% for those earning more than $1m a year

Bitcoin headed for its worst week in almost two months, as a proposed capital gains tax increase for wealthy Americans intensified the volatility whiplashing the world’s largest cryptocurrency.

A fresh bout of selling drove Bitcoin down as much as 7.9% to $47,525 — below its 100-day moving average — as it continued to take out key technical levels. Wall Street analysts have warned of further losses for the notoriously volatile currency that hit a record high of $64,870 on April 14, ahead of rival Coinbase’s stock market listing.

Biden tax plan precipitated slide

The latest threat comes from reports that the Biden administration is considering raising the tax on capital gains to 39.6% for those earning more than $1m a year. That was enough to ignite the biggest slide in US stocks in five weeks.

US investors in Bitcoin, 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.

“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 one analyst.

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 US tax service, the IRS, has stepped up its enforcement of tax collection on cryptocurrency sales.

• Bloomberg