What’s causing the cryptocurrency market to fall?

On Friday, digital currencies plummeted after President Joe Biden’s proposed capital gains tax hike sparked a wave of sale. According to CoinMarketCap numbers, this wiped out more than $200 billion in valuation from the overall cryptocurrency market until Sunday.

Bitcoin was down 7.3 percent at $49,730, it’s the first time since early March that bitcoin has fallen below $50,000. Ether fell by 8% to $2,320. The fifth-largest cryptocurrency, XRP, has dropped by 16%. Bitcoin rose above $51,000 late Friday before falling to $49,783 on Sunday and most altcoins suffered double-digit losses after big tax hikes reports.

President Biden is set to increase the long-term capital gains rate to 43.4 percent, plus a surtax, on the richest Americans. This is higher than the highest federal tax rate on wage wages. Returns on securities kept in taxable accounts and transferred for more than a year will be subject to the new tax rate. 

As per usa today, JPMorgan Chase strategists cautioned that if bitcoin doesn’t crack out over the $60,000 mark quickly, momentum signals would crash, resulting in a drop in bitcoin’s value. “Over the past few days Bitcoin futures markets experienced a steep liquidation in a similar fashion to the middle of last February, middle of last January or the end of last November,” Nikolaos Panigirtzoglou, analyst at JPMorgan, said in the report. “Momentum signals will naturally decay from here for several months, given their still elevated level.”

Concerns over a regulatory ban on Cryptocurrencies have grown as well. A looming blackout in China’s Xinjiang region, which reportedly powers a lot of bitcoin mining where China accounts for about 65 % of all bitcoin mining worldwide. From the end of April, Turkey’s central bank prohibited the use of cryptocurrencies, citing “important dangers” associated with crypto payments. India is also rumored to be considering a bill that would outlaw cryptocurrencies and fine anybody who traded or kept them in the nation. 

The cryptocurrency market is highly volatile, and it is not unusual for bitcoin or other crypto currencies to drop by more than 10%, but make sure you don’t invest in something that you’re not prepared to lose.





Image: guaxipo

*Disclaimer: Fyggex, does not give any guidance, advice or recommendations to neither invest or not in any available normal currency or digital currency directly or indirectly via any trading platform, exchange or provider. Our sole purpose is to make you aware of the related real or potential risks and opportunities so that you can make your own research prior to any financial decisions you may want to take. Past performance and position are not a guarantee of risk-free future returns.