Much of the Bitcoin selling was likely profit-taking by large “whale” investors, but traders also pointed to the latest tax raid from President Biden as a weakness.
Bitcoin is still seen as an ‘alternative asset’ and the price gains over the last year have been helped by bullish stock markets. Confident investors are more likely to spread their wealth around and Bitcoin certainly benefited from that. The stimulus checks handed to the public were also another injection of free money, so the tax increases could take some steam out of all assets. Investment Bank JP Morgan said that up to 4% could be wiped off US company earnings by the new tax proposals.
News reports out on Thursday said the President was planning a raft of proposed changes to the tax code in the US, with a plan to almost double taxes on capital gains to 39.6% for people with incomes over $1 million. This will call into question how investors deal with the big gains in stocks over the last year.
Despite the selling in cryptocurrencies in the last week, this was an overdue correction, and any further losses would be a good opportunity to buy the dip. Famed stock investor Warren Buffett once said that his success was often attributed to his ability to: “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”.
Bitcoin traded below the $50,000 level but has bounced to trade above $54k and will attempt to mount a rally from here. The profit-taking also took some wind out of the Litecoin sail, with the coin now trading at $250 after recent yearly highs above $320.
Disclaimer: information contained herein is provided without considering your personal circumstances, therefore should not be construed as financial advice, investment recommendation or an offer of, or solicitation for, any transactions in cryptocurrencies.