Bitcoin has had a pretty rough week as it has declined in value considerably with many people selling off their cryptocurrency. According to Coindesk, Bitcoin hit a 24 hour low of $47,467.91 making this one of the worst weeks the crypto has had since March 2020.
This is a far cry from the record high Bitcoin reached on April 14 of more than $64,000.
So What Happened?
Numerous analysts say a number of factors are responsible for spooking investors from the rumor that the U.S. Treasury is planning on cracking down on digital money laundering to President Joe Biden’s proposed tax hikes. Jeffery Halley, a senior market analyst at foreign exchange company Oanda, said “It is clear that Bitcoin is more sensitive to capital gains tax threats than most asset class. The threat of regulation… has always been crypto’s Achilles’s Heel…”
As for the president’s tax plan, he plans on proposing a plan that will increase the capital gains tax rate to nearly double its current level on Americans who earn a $1 million or more.
Taxes, Taxes, Taxes
President Biden’s proposal would mean a 43.4% tax on million-dollar earners and this money would go to the president’s $4 trillion infrastructure plan that will focus on childcare and education programs. The IRS has been collecting taxes on cryptocurrency gains requiring investors to disclose transactions on their 2019 tax returns.
Analysts also warn of Bitcoin falling even further with Pankaj Balani, CEO of Delta Exchange, saying “Bitcoin has slipped below the 50-day moving average support that it held sacrosanct through this rally.”
CEO of crypto fintech corporation Panxora Group Gavin Smith that he “… wouldn’t be surprised to see bitcoin drop to around $39,000 USD before then recovering and reaching new all-time highs.” While Smith remains optimistic, others not so much with Guggenheim Partners’ Scott Minerd saying Bitcoin could drop an additional 50% and hit $20,000.
Bitcoin wasn’t the only cryptocurrency to see a hit; in fact, almost all of the cryptocurrencies seen on the CoinDesk 20 fell in price over the past 24 hours.
Buying the Dip
In the past 24 hours, Ethereum and XRP fell 1.92% and 9.97% respectively, but this could quickly change. Matt Blom, the global head of sales trading the crypto exchange Diginex, anticipates “that retail investors will… start buying into the dip until Bitcoin find support at circa $55,000.”
Just bought the dip! Welcome to the rollercoaster to all you newbs #Bitcoin
— Funky (@Benaskren) April 23, 2021
Various analysts, including Scott Minerd, remain bullish on Bitcoin and predict once things settle down, the crypto will back up to pre-crash numbers.
Minerd says that Bitcoin’s current price is set to pull back before jumping to new highs. He even foresees Bitcoin eventually hitting $400,000 per token.
I have low confidence the low for Bitcoin is in, but high confidence the low for many altcoins is in.
I'm guessing the low for everything likely is in and particular alts rebound hard, at least that would follow the general theme of this bull market.
— The Crypto Dog📈 (@TheCryptoDog) April 19, 2021
While I’m personally not sure if and when Bitcoin will reach those heights, I do believe that Bitcoin will make a rebound, but investors might still need to weather the storm. Todd Morakis, the co-founder of digital finance product and service provider JST Capital, said “once Bitcoin gets a head of steam it is tough to stop unless you are at a technical area.”