Bitcoin drops below $50,000 amid tax concerns
The Bitcoin market has been on a straight decline ever since the Coinbase listing, unable to hold its momentum. Several factors have contributed towards the downward spiral of cryptocurrency prices including Coinbase employees selling off their shares right after its listing on Nasdaq, liquidations of leveraged long positions but most recently due to Joe Biden, the US president announcing the possibility of doubling capital-gain taxes. The digital asset with the highest cryptocurrency market capitalization has fallen in line with the US stock market as investors rush to exit and book profits before the anticipated tax hike.
US investors pay 23.8% top rate on long-term capital gains including 20% capital gain tax which is levied on assets held for over a year in taxable accounts. It is anticipated that the President could tax capital gains as ordinary income with the top rate to be potentially at 39.6%, applicable to the investors above $1 million in annual income.
Bitcoin has fallen by 20% in the past week to about $49,369 as of 23 April 2021, 10:34 am IST and BTC has slipped below the 50-day moving average for the first time since October 2020, with the potential for further downside due to the BTC dump last weekend.
Source: Bloomberg
Declining Bitcoin Volatility and rising store-of-value for the asset class
Although the price of Bitcoin is falling, it is declining at a lower rate as compared to previous times which is good for the asset class. The low volatility increases its potential from the store-of-value perspective. As per a research by Coindesk, Bitcoin’s 30-day annualized volatility on April 21 2021 was at 48% which is “a long slow fall from 2021’s high of 112.8% 30-day volatility on Feb. 9” as per the data from CoinDesk below:
Source: Coindesk
Is Ethereum better than Bitcoin?
One of the reasons for the recent Ethereum rally is the launch of Ethereum ETF on a Canadian Exchange, a major development towards making digital assets mainstream. Usually, Bitcoin leads the market and altcoins follow but in the recent past, when comparing Ethereum vs Bitcoin, Ethereum has been leading in terms of price movement as Ethereum recorded a new ATH past $2,600 on 22 April 2021 before falling down to $2,187:
Source: CoinMarketCap
Also, as investors get a better understanding of the cryptocurrency industry, they are moving past Bitcoin and diversifying their portfolios to gain exposure to Ethereum. The upgrade Eth 2.0 is yet another reason why the cryptocurrency has gained further traction with positive sentiments around Ethereum driving its price upwards.
The top Altcoins in 2021
When looking at some of the best cryptocurrencies to invest in or the top-performing cryptocurrencies, Binance Coin (BNB) which was making significant gains is currently trading at $477, down by 9% since last week. Litecoin (LTC) is currently trading at $223, down by 22% since last week. XRP is down by 39% in the last week currently trading at $1.04, and Tron is down by 39% in the past 7 days. Chainlink (-31%), BCH (-18%), EOS (-36%), BAT (-35%), Doge(-17%), DOT (-32%), XLM (-35%) and Cardano (-29) are all in red in the past week.
Top trading pairs on CoinDCX this week |
% Change |
| SQL/BTC | 64% |
| NANO/BTC | 49% |
| BTG/BTC | 48% |
| DGB/BTC | 46% |
Losing trading pairs on CoinDCX this week |
% Change |
| EASY/ETH | -62% |
| PERL/USDT | -53% |
| PHB/TUSD | -52% |
| CHR/USDT | -51% |
Bitcoin Prediction in 2021
In conclusion, the 50-day moving average is indicating possibilities of a further Bitcoin decline while the possibilities of tax hikes by the Biden administration is worsening the sentiments in the market with investors running to sell off or increase their stablecoin holdings. Ethereum was outperforming Bitcoin with its new ATH until the market turned red. Bitcoin leads the bull run but it also leads the bear markets and this is exactly what is happening with altcoins. While BTC is down by 20%, Altcoins are bleeding red with most of the major ones down by around 30% or more.
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