Cryptonews Bitcoin News Biden ‘Tax Plans’ Speculations Spook Crypto Speculators

Biden ‘Tax Plans’ Speculations Spook Crypto Speculators

Tim Alper

Last updated: June 26, 2023 06:54 EDT | 5 min read

Bitcoin (BTC) and altcoin markets are in red today, with with BTC dropping below the key USD 50,000 mark – in the wake of fresh tax-related speculations from the United States.

Joe Biden. Source: A screenshot, Instagram/joebiden

The American President Joe Biden is reportedly set to unveil plans to enact sweeping new tax regulations, including changes to capital gains tax – which might affect thousands of crypto traders in the country also.

The plans will reportedly see the state almost double the rate of taxes on capital gains to 39.6% for those earning over USD 1m.

Some, though, are sensing an opportunity for bargain coin buying, while other pundits think the plan may never see the light of day due to pushback from the House.

Regardless, capital gains tax concerns were already pressing for American crypto enthusiasts, who already had to deal with selling-related dilemmas: Investors often have to pay capital gains tax on tokens they sell for fiat after holding for over a year.

However, BTC’s remarkable performance could end up hitting investors in the pocket, as they’re now sitting on massive gains. In a year, BTC is up by 579%, ethereum (ETH) – 1,092%, while many altcoins recorded much higher gains.

“President Biden could be doing crypto — and especially crypto lending businesses like ours — a favor should his proposal to raise taxes for wealthy investors to over 40% go through. It would make even greater sense to play that oldest trick in the manage-your-finances-smart book: borrow against your assets to avoid capital gains taxes,” Antoni Trenchev, Co-founder and Managing Partner of Nexo, a financial institution for digital assets with over USD 12bn in assets under management, said in an emailed comment, adding that BTC is collateral that appreciates in value.

“In fact, Biden would be doing us so great a favor, regardless of the short-term spook, that I wonder whether this proposal may not be a strategic prelude to pro-crypto legislation in the US,” he added.

Meanwhile, Reuters reported that the news had left BTC, ETH and more “on the ropes,” and would “curb investment in digital assets.”

The news agency quoted Chris Weston, the head of research at Pepperstone Markets, as stating that “ether has been the poster child of movement. It has massively outperformed bitcoin.” However, Weston added that “technical selling” may have been “going through” in the markets – a suggestion that some shred reading, rather than a mass exodus may be underway.

However, Bloomberg quoted Matt Maley, the chief market strategist at Miller Tabak + Co, as stating,

“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. 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 New York Times stressed that the plan is not yet set in stone, adding that the proposal “is not yet final and could change before next week.”

Per media reports, Biden plans to reveal full details of what he has dubbed the American Family Plan next week.

In a separate report, Bloomberg quoted White House Press Secretary Jen Psaki as appearing to confirm that the plan existed, but stating: “We’re still finalizing what the pay-fors look like.”

The plan reportedly includes some USD 1.5trn worth of spending and tax credits designed to reduce poverty, lower childcare costs, and reduce or eliminate the cost of certain forms of education “according to people familiar with the proposal,” the New York Times added.

Reaction on social media was mixed.

On Twitter, Shehan Chandrasekera, the head of Tax Strategy at CoinTracker, suggested that things may not be as bleak as they initially seemed. Although the plans “seem alarming,” they “may not have a widespread impact,” he wrote, adding,

“In 2018, about 153 million taxpayers filed tax returns. Among them, only about 540,000 reported an adjusted income over USD 1 million, representing less than 1% of US taxpayers.”

Some crypto traders, such as CoinMamba, pointed to a somewhat muted stock market reaction, claiming that this could be evidence that Biden’s plan could be met with opposition from lawmakers, writing,

“You would think that the double capital tax rate would have more impact than this. [The] market doesn’t expect it to pass maybe.”

“If it had a chance of passing, we’d be down 2,000 points,” Thomas Hayes, Chairman and Managing Member at hedge fund Great Hill Capital, told Reuters.

Industry figures also had their say, such as the digital asset director at VanEck, Gabor Gurbacs, who complained,

“We work hard, get taxed a large percentage on income, then we are forced to invest because fiat money inflates. Then we’d get taxed ~50% additional on capital gains. In the meantime central banks just print money. Sounds like a scam!”

Some saw it as an opportunity for portfolio growth (and puns), calling on investors to “Biden the dip.”

And as rumors of an “80% crypto tax” started to do the rounds on social media,” some (albeit jokingly) suggested that such “FUD” could have disastrous consequences on the markets.

On Reddit, meanwhile, some suggested that the “dip” was temporary and would not scare off “whales,” with one writing,

“No to whales selling. Yes, to paper handers that are worried about volatility. We saw a dip today at the announcement and we will see another if it gets passed.”

One poster claimed that investors “shouldn’t be worried” about the “scary” plan, as it was “just a rumor Bloomberg published,” and that even if it did prove to be true would likely “not pass the House.”

The optimistic author noted,