Bitcoin crisis: Value sinks below $50,000 as Joe Biden tax plan sparks panic

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The White House announced proposals for the new tax plan, known as the American Family Plan, which Mr Biden is expected to explain in full next week. This would reverse former US President Donald Trump’s income tax cut in 2017 for highest income earners, as the proposal would increase the top marginal income tax rate to 39.6 percent from 37 percent, according to the New York Times and Bloomberg. The plans sparked Bitcoin to slump seven percent to $48,176, falling below the $50,000 mark for the first time since March, while Ether and XRP, also fell around 10 percent.

White House Press Secretary Jen Psaki said: "His view is that that should be on the backs of the wealthiest Americans who can afford it and corporations and businesses who can afford it."

The tax plans also hit markets, resulting in investors to look for profits in stocks and other risk assets, which have rallied massively on the hopes of a strong economic recovery.

Levies on investment gains were said to be in line for huge increases.

Bitcoin is also on track for a 15 percent loss on the week, although it is still up 65 percent since the start of the year.

Bitcoin sinks below $50,000 as cryptos stumble over Biden tax plans

Bitcoin sinks below $50,000 as cryptos stumble over Biden tax plans (Image: GETTY)

Ether also dropped more than 10 percent to as low as $2,107, a day after climbing to a record $2,645.97.

Chris Weston, head of research at Pepperstone Markets Ltd, a foreign exchange broker based in Melbourne, explained why the tax plan may be affecting the value.

He said: "That's what everyone is talking about now.

"And I think you may have some technical selling going through. Ether's been the poster child of movement.

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"It has massively outperformed Bitcoin."

Meanwhile, shares of cryptocurrency exchange Coinbase also fell five percent to $278 in US pre-market trading.

This marked the lowest level since its listing earlier this month.

The listing had driven bitcoin prices to $65,000, before pulling back 25 percent in the following days.

Neil Wilson, a chief market analyst at Markets.com, said: "The Coinbase listing the ultimate poacher-turned-gamekeeper moment - might have been the high watermark for Bitcoin."

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It comes as Mr Biden is set to use the tax rise to help pay for childcare and education, but not for healthcare.

The plan would also almost double taxes on capital gains to 39.6 percent for people who earn more than $1 million.

This would be a huge increase from the current rate of 20 percent.

Shana Sissel, chief investment officer at Spotlight Asset Group, added markets may continue to drop if the plans are approved by Congress next week.

She told the FT: “We will see a lot more selling at the end of the year as people try to get in front of that."

However, Avi Felman, head trader and portfolio manager at BlockTower Capital, a crypto and blockchain investment firm in New York, said the values are likely to eventually settle down soon following the chaos.

He said: "Western funds started offloading Bitcoin aggressively on the back of the Biden tax plan.

"Ultimately news-based selling generally reverses."

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